Form 1-A Issuer Information UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 1-A
REGULATION A OFFERING STATEMENT
UNDER THE SECURITIES ACT OF 1933
OMB APPROVAL

FORM 1-A

OMB Number: 3235-0286


Estimated average burden hours per response: 608.0

1-A: Filer Information

Issuer CIK
0001790169
Issuer CCC
XXXXXXXX
DOS File Number
Offering File Number
Is this a LIVE or TEST Filing? LIVE TEST
Would you like a Return Copy?
Notify via Filing Website only?
Since Last Filing?

Submission Contact Information

Name
Phone
E-Mail Address

1-A: Item 1. Issuer Information

Issuer Infomation

Exact name of issuer as specified in the issuer's charter
Flora Growth Corp.
Jurisdiction of Incorporation / Organization
ONTARIO, CANADA
Year of Incorporation
2019
CIK
0001790169
Primary Standard Industrial Classification Code
MEDICINAL CHEMICALS & BOTANICAL PRODUCTS
I.R.S. Employer Identification Number
00-0000000
Total number of full-time employees
5
Total number of part-time employees
8

Contact Infomation

Address of Principal Executive Offices

Address 1
65 Queen Street West, Suite 800
Address 2
City
Toronto
State/Country
ONTARIO, CANADA
Mailing Zip/ Postal Code
M5H2M5
Phone
416-861-2267

Provide the following information for the person the Securities and Exchange Commission's staff should call in connection with any pre-qualification review of the offering statement.

Name
Damian Lopez
Address 1
Address 2
City
State/Country
Mailing Zip/ Postal Code
Phone

Provide up to two e-mail addresses to which the Securities and Exchange Commission's staff may send any comment letters relating to the offering statement. After qualification of the offering statement, such e-mail addresses are not required to remain active.

Financial Statements

Industry Group (select one) Banking Insurance Other

Use the financial statements for the most recent period contained in this offering statement to provide the following information about the issuer. The following table does not include all of the line items from the financial statements. Long Term Debt would include notes payable, bonds, mortgages, and similar obligations. To determine "Total Revenues" for all companies selecting "Other" for their industry group, refer to Article 5-03(b)(1) of Regulation S-X. For companies selecting "Insurance", refer to Article 7-04 of Regulation S-X for calculation of "Total Revenues" and paragraphs 5 and 7 of Article 7-04 for "Costs and Expenses Applicable to Revenues".

Balance Sheet Information

Cash and Cash Equivalents
$ 0.00
Investment Securities
$ 0.00
Total Investments
$
Accounts and Notes Receivable
$ 238.00
Loans
$
Property, Plant and Equipment (PP&E):
$ 0.00
Property and Equipment
$
Total Assets
$ 238.00
Accounts Payable and Accrued Liabilities
$ 414082.00
Policy Liabilities and Accruals
$
Deposits
$
Long Term Debt
$ 0.00
Total Liabilities
$ 414082.00
Total Stockholders' Equity
$ -413844.00
Total Liabilities and Equity
$ 238.00

Statement of Comprehensive Income Information

Total Revenues
$ 0.00
Total Interest Income
$
Costs and Expenses Applicable to Revenues
$ 1899714.00
Total Interest Expenses
$
Depreciation and Amortization
$ 0.00
Net Income
$ -1899714.00
Earnings Per Share - Basic
$ -0.99
Earnings Per Share - Diluted
$ -0.99
Name of Auditor (if any)
McGovern Hurley LLP

Outstanding Securities

Common Equity

Name of Class (if any) Common Equity
Common Stock
Common Equity Units Outstanding
70000000
Common Equity CUSIP (if any):
n/a
Common Equity Units Name of Trading Center or Quotation Medium (if any)
n/a

Preferred Equity

Preferred Equity Name of Class (if any)
n/a
Preferred Equity Units Outstanding
0
Preferred Equity CUSIP (if any)
n/a
Preferred Equity Name of Trading Center or Quotation Medium (if any)
n/a

Debt Securities

Debt Securities Name of Class (if any)
n/a
Debt Securities Units Outstanding
0
Debt Securities CUSIP (if any):
n/a
Debt Securities Name of Trading Center or Quotation Medium (if any)
n/a

1-A: Item 2. Issuer Eligibility

Issuer Eligibility

Check this box to certify that all of the following statements are true for the issuer(s)

1-A: Item 3. Application of Rule 262

Application Rule 262

Check this box to certify that, as of the time of this filing, each person described in Rule 262 of Regulation A is either not disqualified under that rule or is disqualified but has received a waiver of such disqualification.

Check this box if "bad actor" disclosure under Rule 262(d) is provided in Part II of the offering statement.

1-A: Item 4. Summary Information Regarding the Offering and Other Current or Proposed Offerings

Summary Infomation

Check the appropriate box to indicate whether you are conducting a Tier 1 or Tier 2 offering Tier1 Tier2
Check the appropriate box to indicate whether the financial statements have been audited Unaudited Audited
Types of Securities Offered in this Offering Statement (select all that apply)
Equity (common or preferred stock)
Option, warrant or other right to acquire another security
Security to be acquired upon exercise of option, warrant or other right to acquire security
Does the issuer intend to offer the securities on a delayed or continuous basis pursuant to Rule 251(d)(3)? Yes No
Does the issuer intend this offering to last more than one year? Yes No
Does the issuer intend to price this offering after qualification pursuant to Rule 253(b)? Yes No
Will the issuer be conducting a best efforts offering? Yes No
Has the issuer used solicitation of interest communications in connection with the proposed offering? Yes No
Does the proposed offering involve the resale of securities by affiliates of the issuer? Yes No
Number of securities offered
60000000
Number of securities of that class outstanding
70000000

The information called for by this item below may be omitted if undetermined at the time of filing or submission, except that if a price range has been included in the offering statement, the midpoint of that range must be used to respond. Please refer to Rule 251(a) for the definition of "aggregate offering price" or "aggregate sales" as used in this item. Please leave the field blank if undetermined at this time and include a zero if a particular item is not applicable to the offering.

Price per security
$ 0.7500
The portion of the aggregate offering price attributable to securities being offered on behalf of the issuer
$ 50000000.00
The portion of the aggregate offering price attributable to securities being offered on behalf of selling securityholders
$ 0.00
The portion of the aggregate offering price attributable to all the securities of the issuer sold pursuant to a qualified offering statement within the 12 months before the qualification of this offering statement
$ 0.00
The estimated portion of aggregate sales attributable to securities that may be sold pursuant to any other qualified offering statement concurrently with securities being sold under this offering statement
$ 0.00
Total (the sum of the aggregate offering price and aggregate sales in the four preceding paragraphs)
$ 50000000.00

Anticipated fees in connection with this offering and names of service providers

Underwriters - Name of Service Provider
Underwriters - Fees
$ 0.00
Sales Commissions - Name of Service Provider
Dalmore Partners LLC
Sales Commissions - Fee
$ 900000.00
Finders' Fees - Name of Service Provider
Finders' Fees - Fees
$ 0.00
Audit - Name of Service Provider
McGovern Hurley LLP
Audit - Fees
$ 20000.00
Legal - Name of Service Provider
Greenberg Traurig LLP
Legal - Fees
$ 160000.00
Promoters - Name of Service Provider
Promoters - Fees
$ 0.00
Blue Sky Compliance - Name of Service Provider
DALV Consulting LLC, Dalmore Partners LLC, FINRA fees
Blue Sky Compliance - Fees
$ 63000.00
CRD Number of any broker or dealer listed:
136352
Estimated net proceeds to the issuer
$ 48857000.00
Clarification of responses (if necessary)
Offering consists of 40,000,000 Units at $0.75 per Unit, each unit comprised of one common share and one-half of one warrant for an additional 20,000,000 common shares. Blue Sky Compliance 30,000 to DALV, 25,000 to Dalmore & 8,000 FINRA

1-A: Item 5. Jurisdictions in Which Securities are to be Offered

Jurisdictions in Which Securities are to be Offered

Using the list below, select the jurisdictions in which the issuer intends to offer the securities

Selected States and Jurisdictions
ALABAMA
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
DISTRICT OF COLUMBIA
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
PUERTO RICO
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING
ALBERTA, CANADA
BRITISH COLUMBIA, CANADA
MANITOBA, CANADA
NEW BRUNSWICK, CANADA
NEWFOUNDLAND, CANADA
NOVA SCOTIA, CANADA
ONTARIO, CANADA
PRINCE EDWARD ISLAND, CANADA
QUEBEC, CANADA
SASKATCHEWAN, CANADA
YUKON, CANADA
CANADA (FEDERAL LEVEL)

Using the list below, select the jurisdictions in which the securities are to be offered by underwriters, dealers or sales persons or check the appropriate box

None
Same as the jurisdictions in which the issuer intends to offer the securities
Selected States and Jurisdictions

ALABAMA
ARIZONA
FLORIDA
NEW JERSEY
NORTH DAKOTA
TEXAS
WASHINGTON

1-A: Item 6. Unregistered Securities Issued or Sold Within One Year

Unregistered Securities Issued or Sold Within One Year

None

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Flora Growth Corp.
(b)(1) Title of securities issued
Common stock
(2) Total Amount of such securities issued
70000000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
1400000
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Flora Growth Corp.
(b)(1) Title of securities issued
Stock Option
(2) Total Amount of such securities issued
7000000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
Exercisable at $0.05 per share
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Issued

As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:

(a)Name of such issuer
Flora Growth Corp.
(b)(1) Title of securities issued
Share Purchase Warrant
(2) Total Amount of such securities issued
7000000
(3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer.
0
(c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof.
Exercisable at $0.05 per share
(2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)).

Unregistered Securities Act

(e) Indicate the section of the Securities Act or Commission rule or regulation relied upon for exemption from the registration requirements of such Act and state briefly the facts relied upon for such exemption
Not applicable as no securities were issued to US residents. The Company relied on Canadian securities laws exemptions.

PART II – INFORMATION REQUIRED IN OFFERING CIRCULAR
 
An Offering Statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission (the “SEC”). Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the Offering Statement filed with the SEC is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the Offering Statement in which such Final Offering Circular was filed may be obtained.
 
REGULATION A OFFERING CIRCULAR UNDER THE SECURITIES ACT OF 1933
 
PRELIMINARY OFFERING CIRCULAR DATED OCTOBER 10, 2019, SUBJECT TO COMPLETION
 
 
 
FLORA GROWTH CORP.
 
40,000,000 Units

65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5
+1 (416) 861 - 2267
www.floragrowth.ca
 
Flora Growth Corp., a corporation formed under the laws of the Province of Ontario (the “Company”, “we,” or “our”), is offering up to 40,000,000 (the “Maximum Offering”) units (the “Units”) of the Company to be sold in this offering (the “Offering”). Each Unit is comprised of one common share in the capital of the Company, with no par value per share (a “Common Share”), and one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”) to purchase one additional Common Share (a “Warrant Share”) at an exercise price of $1.00 per Warrant Share, subject to certain adjustments, over an 18-month exercise period following the date of issuance of the Warrant. The Units are being offered at a purchase price of $0.75 per Unit on a “best efforts” basis. The Common Shares and Warrants will be separately transferable following the termination of any transfer hold periods under applicable law. See “Securities Being Offered” beginning on page 53 for a discussion of certain items required by Item 14 of Part II of Form 1-A. We are selling our Units through a Tier 2 offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933, as amended (the “Securities Act”), and we intend to sell the Units either directly to investors or through registered broker-dealers who are paid commissions. The Company has engaged Dalmore Group, LLC, a New York limited liability company and FINRA/SIPC registered broker-dealer ("Dalmore"), to provide broker-dealer services in seven specified states, including Washington, Arizona, Texas, Alabama, North Dakota, Florida and New Jersey, in connection with this Offering.  This Offering will terminate on the earlier of [(i) ________ __, 202__], (ii) the date on which the Maximum Offering is sold, or (iii) when the Board of Directors of the Company elects to terminate the offering (in each such case, the “Termination Date”). There is no aggregate minimum requirement for the Offering to become effective; therefore, we reserve the right, subject to applicable securities laws, to begin applying “dollar one” of the proceeds from the Offering towards our business strategy, including, without limitation, facility expenses, research and development expenses, offering expenses, working capital and general corporate purposes, and other uses, as more specifically set forth in the “Use of Proceeds” section of this Offering Circular. The minimum investment amount for an investor is $1,000; however, we reserve the right to waive this minimum in the sole discretion of our management. There is no escrow established for this Offering. We will hold closings upon the receipt of investors' subscriptions and acceptance of such subscriptions by the Company. If, on the initial closing date, we have sold less than the Maximum Offering, then we may hold one or more additional closings for additional sales, until the earlier of: (i) the sale of the Maximum Offering, or (ii) the Termination Date. We expect to commence the sale of the Units as of the date on which the Offering Statement of which this Offering Circular (the “Offering Circular”) is a part (the “Offering Statement”) is qualified by the SEC.


Investing in our Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares involve a high degree of risk. These are speculative securities. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” starting on page 10 for a discussion of certain risks that you should consider in connection with an investment in our securities.

THE SEC DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SEC; HOWEVER, THE SEC HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

Title of Each Class of Securities to be Qualified  
Amount to be Qualified
 
 
Price to Public
 
 
Underwriting Discount and Commissions
 
Proceeds to
the
Company (2)
 
Units, each consisting of:
40,000,000
 
 
$
0.75
 
 
(1)
 
$
29,075,000
 
One Common Share
40,000,000
 
 
 
-
 
 
 
 
 
 
 
One-half of one Warrant
40,000,000
 
 
 
-
 
 
 
 
 
 
 
Common Shares underlying Warrants
20,000,000
 
 
$
1.00
 
 
(1)
 
$
20,000,000
 
Total Maximum Offering (3)
 
 
 
$
50,000,000
 
 
(1)
 
$
49,075,000
 

(1)
The minimum investment amount for each subscription is 1,333 Units or $1,000. The Offering is being made directly to investors by the management of the Company on a “best efforts” basis.  We reserve the right to offer the Units through broker-dealers who are registered with the Financial Industry Regulatory Authority (“FINRA”). The Company has engaged Dalmore Group, LLC, a New York limited liability company and FINRA/SIPC registered broker-dealer ("Dalmore"), to provide broker-dealer services in seven specified states, including Washington, Arizona, Texas, Alabama, North Dakota, Florida and New Jersey, in connection with this Offering.  The Company has agreed to pay Dalmore a one-time setup fee of $25,000, as described in the Broker-Dealer Agreement between the Company and Dalmore, as well as a 3% commission on the aggregate amount raised by the Company from investors in the specified states from the sale of Units. Commissions are not payable upon exercise of the Warrants.
 
 
(2)
 The amounts shown in the "Proceeds to the Company" column include a deduction of 3% for commissions payable to Dalmore on all the Units being offered. The 3% commission will only be paid on investments in the seven states where Dalmore is engaged to provide broker-dealer services (Washington, Arizona, Texas, Alabama, North Dakota, Florida and New Jersey), although the Company intends to offer Units in all states within the United States and in certain provinces of Canada (and other non-U.S. jurisdictions). The amount of total estimated proceeds to the Company in the table above also includes a deduction of $25,000 for the one-time setup fee payable to Dalmore. The amounts shown are before deducting other organization and Offering costs to be borne by the Company, including legal, accounting, printing, due diligence, marketing, selling and other costs incurred in the Offering of the Units (See "Use of Proceeds to Issuer" and "Plan of Distribution and Selling Securityholders").
 
 
 (3)
The Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares are being offered pursuant to Regulation A of Section 3(b) of the Securities Act for Tier 2 offerings. The Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares are only issued to purchasers who satisfy the requirements set forth in Regulation A. We have the option in our sole discretion to accept less than the minimum investment. The Total Maximum Offering amounts include the aggregate price and future aggregate potential proceeds of $20,000,000 with respect to the Warrant Shares if all 40,000,000 Units are sold and all 20,000,000 Warrant Shares are sold upon exercise of the Warrants issued in the Offering.

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN TEN PERCENT (10%) OF THE GREATER OF YOUR ANNUAL INCOME OR YOUR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A+. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO WWW.INVESTOR.GOV.

This Offering Circular contains all of the representations by us concerning this Offering, and no person shall make different or broader statements than those contained herein. Investors are cautioned not to rely upon any information not expressly set forth in this Offering Circular.
Sale of our Units will commence on approximately ________ __, 2019. 

The Company is following the “Offering Circular” format of disclosure under Regulation A+.

The date of this Offering Circular is October 10, 2019
2

TABLE OF CONTENTS

 
 
Page
 
 
 
 
  4
 
  4
 
  6
 
 10
 
 24
 
 26
 
 27
 
 28
 
 39
 
 40
 
 46
 
 50
 
 52
 
 53
 
 53
 
 56
Part F/S
 
 
 
 F-1
Part III – Exhibits
 
 
 
 57
 
 59


3

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

We are offering to sell, and seeking offers to buy, our securities only in jurisdictions where such offers and sales are permitted. Please carefully read the information in this offering circular and any accompanying offering circular supplements, which we refer to collectively as the “Offering Circular.” You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with any information other than the information contained in this Offering Circular. The information contained in this Offering Circular is accurate only as of its date or as of the respective dates of any documents or other information incorporated herein by reference, regardless of the time of its delivery or of any sale or delivery of our securities. Neither the delivery of this Offering Circular nor any sale or delivery of our securities shall, under any circumstances, imply that there has been no change in our affairs since the date of this Offering Circular. This Offering Circular will be updated and made available for delivery to the extent required by the federal securities laws.

This Offering Circular is part of an offering statement (the “Offering Statement”) that we filed with the Securities and Exchange Commission (the “SEC”) using a continuous offering process.  Periodically, we may provide an offering circular supplement that would add, update or change information contained in this Offering Circular.  Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement.  The Offering Statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular.  You should read this Offering Circular and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC.  The Offering Statement and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov.

Unless otherwise indicated, data contained in this Offering Circular concerning the business of the Company are based on information from various public sources. This Offering Circular also includes statistical and other market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Although we believe that these data are generally reliable, such information is inherently imprecise, and our estimates and expectations based on these data involve a number of assumptions and limitations. As a result, you are cautioned not to give undue weight to such data, estimates or expectations. All references in this Offering Circular to “$” or “dollars” are to United States dollars, unless specifically stated otherwise.

In this Offering Circular, unless the context indicates otherwise, references to the “Company,” “we,” “our,” and “us” refer to the activities of and the assets and liabilities of the business and operations of Flora Growth Corp., a Canadian corporation formed under the laws of the Province of Ontario, and its subsidiary.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
Some of the statements under “Summary,” “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Business” and elsewhere in this Offering Circular constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms, or other comparable terminology.
 
You should not place undue reliance on forward-looking statements. The cautionary statements set forth in this Offering Circular, including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:
 
Business risks including:

limited operating history;
reliance on licenses and authorizations;
changes in cannabis laws, regulations and guidelines;
demand for cannabis and derivative products;
product liability;

4

product recalls;
regulatory compliance risks;
retention and acquisition of skilled personnel;
risks inherent in an agricultural business;
supply of cannabis seeds;
competition;
legal and regulatory proceedings;
ability to establish and maintain bank accounts;
insurance coverage;
protected areas established by the National System of Protected Areas;
changes in corporate structure;
emerging market risks; and
global economy risks.

Risks related to investment in a company with Colombian operations including:
economic and political risks inherent with any investment in Colombia;
governmental influence on the Colombian economy;
internal security issues; and
political and economic instability in the region.

Financial and accounting risks including:
foreign sales;
estimates or judgments relating to critical accounting policies;
tax risks; and
failure to develop our internal controls.

Although the forward-looking statements in this Offering Circular are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as may be required by law, to re-issue this Offering Circular or otherwise make public statements updating our forward-looking statements.

5


SUMMARY
 
This summary highlights selected information contained elsewhere in this Offering Circular. This summary is not complete and does not contain all the information that you should consider before deciding whether to invest in our securities. You should carefully read the entire Offering Circular, including the risks associated with an investment in the Company discussed in the “Risk Factors” section of this Offering Circular, before making an investment decision. Some of the statements in this Offering Circular are forward-looking statements. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” above.

Company Information
 
Flora Growth Corp. (the “Company,” “Flora”, “we,” “our,” and “us”) was formed on March 13, 2019 under the laws of the Province of Ontario, and is headquartered in Toronto, Ontario. The Company is focused on cultivating, processing and supplying all natural, medicinal-grade cannabis oil, cannabis oil extracts and related products to large channel distributors, including pharmacies, medical clinics, and cosmetic companies. Flora’s principal and 90%-owned subsidiary, Cosechemos Ya S.A.S. (“Cosechemos”) is a fully licensed and permitted cultivator, producer, and distributor of CBD medical cannabis in Colombia for: (a) use in Colombia; and (b) international export. Flora’s subsidiary operations are in Giron, Colombia.

Cosechemos became a 90%-owned subsidiary of the Company effective October 2, 2019, pursuant to a share purchase agreement dated July 16, 2019 (the “Share Purchase Agreement”), by and among the Company and Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa (collectively, the “Vendors”).   Pursuant to the Share Purchase Agreement, Flora acquired 4,500 shares of Cosechemos (which is equivalent to 90% of the issued and outstanding shares of Cosechemos).  As consideration for the Cosechemos shares, Flora (i) paid $80,000 to the Vendors, and (ii) granted the Vendors a 10% non-dilutive, free carried interest in Cosechemos (the “Free Carry”).  The Free Carry will terminate upon Flora investing an aggregate of $25 million into Cosechemos.  Upon the termination of the Free Carry, the Vendors will be required, if needed by Cosechemos, to fund the operations of Cosechemos on a pro rata basis or risk having their equity interest in Cosechemos be diluted. Additionally, Flora is required to pay the Vendors, as a one-time payment, $750,000 within 60 days of Cosechemos earning a net income of $10 million.

Our principal place of business and mailing address is Flora Growth Corp., 65 Queen Street West, Suite 800, Toronto, ON M5V 3W6, and our telephone number is 1(416) 861-2267.  Our Colombian-based offices are located at Carrera 25 # 29 - 87 Local 17 A, Giron, Santander, Colombia. Our website address is www.floragrowth.ca. The information contained therein or accessible thereby shall not be deemed to be incorporated into this Offering Circular.

Our Business

Cosechemos’ facilities are located at its 361-hectare cannabis farm in Giron, Colombia. The equatorial location of its facilities offers Flora the opportunity to cultivate the highest quality cannabis flowers and produce correspondingly high-quality oil extracts through combination of a consistent and natural 12-hour sunlight/darkness light cycle, along with the expertise provided by the Flora’s workforce drawn from Colombia’s cut flower industry. Flora also benefits from the natural light cycle through minimal energy requirements, providing the potential for an extremely low carbon production footprint and high production cost efficiency.

Description of Property

Leased Real Property

Flora, through Cosechemos has (i) one property under lease, the Cosechemos Farm, in Giron, Santander, Colombia, and (ii) the option to lease the Palagua Farms, in Puerto Boyaca, Boyaca, Colombia.

The Cosechemos Farm is a 361-hectare property.  The Company intends to use 100 hectares for the cultivation of cannabis at the Cosechemos Farm.  The Palagua Farms is comprised of two contiguous forms for a total of 2,132 hectares.

Following the successful cultivation of 100 hectares at the Cosechemos Farm, the Company intends to use 50 hectares for the of cultivation of cannabis at the Palagua Farms.  Following the successful cultivation of the first 50 hectares, the Company can cultivate up to an additional 1,850 hectares at the Palagua Farms.

Risks Related to Our Business
 
Our business and our ability to execute our business strategy are subject to a number of risks, which are more fully described in the section titled “Risk Factors” beginning on page 10. These risks include, among others:
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Business risks including:
reliance on licenses and authorizations and delays in receiving such licenses and authorizations;
changes in cannabis laws, regulations and guidelines;
demand for cannabis and derivative products;
product liability;
product recalls;
regulatory compliance risks;
retention and acquisition of skilled personnel;
risks inherent in an agricultural business;
supply of cannabis seeds;
limited operating history;
managing growth;
legal and regulatory proceedings;
ability to establish and maintain bank accounts;
insurance coverage;
protected areas established by the National System of Protected Areas;
changes in corporate structure;
emerging market risks; and
global economy risks.

Risks related to investment in a company with Colombian operations including:
economic and political risks inherent with any investment in Colombia;
guerrilla activity in Colombia;
operational risks;
inflation in Colombia;
operations in Spanish; and
enforements of judgements.

Financial and accounting risks including:
access to capital;
foreign sales and fluctuations in the exchange rate between the Colombian peso and the Canadian dollar, the Colombian peso and the U.S. dollar and the U.S. dollar and the Canadian dollar;
estimates or judgments relating to critical accounting policies; and
tax risks.
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Our financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, we have funded operations with debt and proceeds from the sale and issuance of equity to investors. Our future viability is largely dependent upon our ability to raise additional capital to finance our operations. Our management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions. Although our management continues to pursue these plans, there is no assurance that we will be successful with this Offering or in obtaining sufficient financing on terms acceptable to us to continue to finance our operations, if at all. These circumstances raise substantial doubt on our ability to continue as a going concern, and our financial statements do not include any adjustments that might result from the outcome of these uncertainties.

REGULATION A+

We are offering the Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares pursuant to rules of the SEC mandated under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). These offering rules are often referred to as “Regulation A+.” We are relying upon “Tier 2” of Regulation A+, which allows us to offer securities of up to $50 million in a 12-month period.
 
In accordance with the requirements of Tier 2 of Regulation A+, we are required to publicly file annual, semiannual, and current event reports with the SEC.
 
THE OFFERING

Issuer:
 
Flora Growth Corporation, a corporation incorporated in the Province of Ontario, Canada.
 
 
 
Units Offered:
 
A maximum of 40,000,000 units (the “Units”) at an offering price of $0.75 per Unit, each Unit being comprised of:
 one common share in the capital of the Company, with no par value per share (a “Common Share”); and
 one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”) to purchase one additional Common Share (a “Warrant Share”) at an exercise price of $1.00 per share, subject to customary adjustments, over an 18-month exercise period following the date of issuance of the Warrant.
 
 
 
Warrant Shares Offered:
 
A maximum of 20,000,000 Warrant Shares at an exercise price of $1.00 per Warrant Share, subject to customary adjustments, over an 18-month exercise period following the date of issuance.
 
 
 
Common Shares Outstanding before the Offering (1):
 
70,000,000 Common Shares.
 
 
 

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Common Shares to be Outstanding after the Offering (1):
 
110,000,000 Common Shares if the maximum Units are sold, or 130,000,000 Common Shares upon exercise of the Warrants if the maximum Units are sold and the maximum Warrant Shares are issued.
 
 
 
Price per Unit:
 
$0.75
 
 
 
Price per Warrant Share
 
$1.00, subject to customary adjustments as described in the form of Warrant included as Exhibit 4.2 hereto.
 
 
 
Maximum Offering:
 
40,000,000 Units, at an offering price of $0.75 per Unit, (including the exercise of the Warrants to purchase 20,000,000 Warrant Shares with an exercise price of $1.00 per Warrant Share, subject to customary adjustments).
 
 
 
Use of Proceeds:
 
If we sell all of the 40,000,000 Units being offered, and all of the 20,000,000 Warrant Shares underlying the Units being offered, our net proceeds (after deducting fees and commissions and estimated offering expenses) will be approximately $48,857,000. We will use these net proceeds for research and development expenses, working capital and general corporate purposes, and such other purposes described in the “Use of Proceeds to Issuer section of this Offering Circular.  
 
 
 
Resale Restrictions:
 
See “Securities Being Offered – Resale Restrictions” on page 55.
 
 
 
Risk Factors:
 
Investing in our Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares involve a high degree of risk. See “Risk Factors” starting on page 10.

(1)
Excludes 7,000,000 Common Shares issuable upon exercise of stock options outstanding which are exercisable at an exercise price of $0.05 per share and 7,000,000 Common Shares issuable upon exercise of common share purchase warrants outstanding which are exercisable at an exercise price of $0.05 per share.
 

 

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Offering Circular, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the price of our Common Shares could decline and you may lose all or part of your investment. See “Cautionary Statement Regarding Forward Looking Statements” above for a discussion of forward-looking statements and the significance of such statements in the context of this Offering Circular.
 
Risks Related to our Business and Industry

We are an early-stage company with limited operating history.
We are a company focused on cultivating, processing and supplying all natural, medicinal-grade cannabis oil extracts and related products to large channel distributors, newly-formed in March 2019, and have limited operating history. We have limited financial resources and no source of operating cash flow. Additionally, there can be no assurance that additional funding will be available to us for the development of our business, which will require the commitment of substantial resources. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we may be unable to:
successfully implement or execute our business plan, or that our business plan is sound;
adjust to changing conditions or keep pace with increased demand;
attract and retain an experienced management team; or
raise sufficient funds in the capital markets to effectuate our business plan, including product development, licensing and approvals.
Reliance on Licenses and Authorizations.
Our ability to grow, store and sell cannabis in Colombia is dependent on our ability to sustain and/or obtain the necessary licenses and authorizations by certain authorities in Colombia. To date, we have received the Non-Psychoactive Cannabis Cultivation License and have applied for the Psychoactive Cannabis Cultivation License and the Cannabis Derivatives Manufacturing License. The impact of the compliance regime, any delays in obtaining, or failure to obtain or keep the regulatory approvals may significantly delay or impact the development of markets, products and sales initiatives and could have a material adverse effect on our business, results of operations and financial condition.
The licenses and authorizations are subject to ongoing compliance and reporting requirements and our ability to obtain, sustain or renew any such licenses and authorizations on acceptable terms is subject to changes in regulations and policies and to the discretion of the applicable authorities or other governmental agencies in Colombia and potentially in other foreign jurisdictions. Failure to comply with the requirements of the licenses or authorizations or any failure to maintain the licenses or authorizations would have a material adverse impact on our business, financial condition and operating results.
Although we believe that we will meet the requirements to obtain, sustain or renew the necessary licenses and authorizations, there can be no guarantee that the applicable authorities will issue these licenses or authorizations. Should the authorities fail to issue the necessary licenses or authorizations, we may be curtailed or prohibited from the production and/or distribution of cannabis or from proceeding with the development of our operations as currently proposed and our business, results of operations and financial condition may be materially adversely affected.
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Change of Cannabis Laws, Regulations, and Guidelines.
Cannabis laws and regulations are dynamic and subject to evolving interpretations which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan. It is also possible that regulations may be enacted in the future that will be directly applicable to certain aspects of our businesses. We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. Management expects that the legislative and regulatory environment in the cannabis industry in Colombia and internationally will continue to be dynamic and will require innovative solutions to try to comply with this changing legal landscape in this nascent industry for the foreseeable future. Compliance with any such legislation may have a material adverse effect on our business, financial condition and results of operations.
Public opinion can also exert a significant influence over the regulation of the cannabis industry. A negative shift in the public’s perception of the cannabis industry could affect future legislation or regulation in different jurisdictions.
Demand for Cannabis and Derivative Products.
The legal cannabis industry in Colombia is at an early stage of its development. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of medicinal cannabis are mixed and evolving and can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medicinal cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favourable to the medicinal cannabis market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favourable than, or that question, earlier research reports, findings or publicity, could have a material adverse effect on the demand for medicinal cannabis and on our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding cannabis in general, or associating the consumption of medicinal cannabis with illness or other negative effects or events, could have such a material adverse effect. Public opinion and support for medicinal cannabis use has traditionally been inconsistent and varies from jurisdiction to jurisdiction. Our ability to gain and increase market acceptance of our business may require substantial expenditures on investor relations, strategic relationships and marketing initiatives. There can be no assurance that such initiatives will be successful and their failure to materialize into significant demand may have an adverse effect on our financial condition.
Product Liability.
As a distributor of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused bodily harm or injury. In addition, the sale of our products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Adverse reactions resulting from human consumption of our products alone or in combination with other medications or substances could occur. We may be subject to various product liability claims, including, among others, that our products caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning health risks, possible side effects or interactions with other substances. Product liability claims or regulatory actions against us could result in increased costs, could adversely affect our reputation with our clients and consumers generally, and could have a material adverse effect on our results of operations and financial condition. There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive and may not be available in the future on acceptable terms, or at all. The inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of our potential products.
Product Recalls.
Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labelling disclosure. If any of our products are recalled due to an alleged product defect or for any other reason, we could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. We may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin, or at all. In addition, a product recall may require significant management attention. There can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. Additionally, if our products are subject to recall, our reputation could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for our products and could have a material adverse effect on our results of operations and financial condition. Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention, potential loss of applicable licenses, and potential legal fees and other expenses.
Regulatory Compliance Risks.
Achievement of our business objectives is contingent, in part, upon compliance with regulatory requirements enacted by governmental authorities and obtaining all regulatory approvals, where necessary, for the sale of our products. We may not be able to obtain or maintain the necessary licenses, permits, quotas, authorizations or accreditations to operate our business, or may only be able to do so at great cost. We cannot predict the time required to secure all appropriate regulatory approvals for our products, or the extent of testing and documentation that may be required by local governmental authorities.
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Our officers and directors must rely, to a great extent, on Colombian legal counsel and local consultants retained in order to keep abreast of material legal, regulatory and governmental developments as they pertain to and affect our business operations, and to assist us with governmental relations. We must rely, to some extent, on those members of management and the board who have previous experience working and conducting business in Colombia in order to enhance our understanding of and appreciation for the local business culture and practices in Colombia.
We also rely on the advice of local experts and professionals in connection with any current and new regulations that develop in respect of banking, financing and tax matters in Colombia. Any developments or changes in such legal, regulatory or governmental requirements or in local business practices in Colombia are beyond our control and may adversely affect our business.
We will incur ongoing costs and obligations related to regulatory compliance. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. We may be required to compensate those suffering loss or damage by reason of our operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on our business, results of operations and financial condition.
Retention and Acquisition of Skilled Personnel.
The loss of any member of our management team could have a material adverse effect on our business and results of operations. In addition, the inability to hire or the increased costs of hiring new personnel, including members of executive management, could have a material adverse effect on our business and operating results. The expansion of marketing and sales of our products will require us to find, hire and retain additional capable employees who can understand, explain, market and sell our products. There is intense competition for capable personnel in all of these areas and we may not be successful in attracting, training, integrating, motivating, or retaining new personnel, vendors, or subcontractors for these required functions. New employees often require significant training and in many cases, take a significant amount of time before they achieve full productivity. As a result, we may incur significant costs to attract and retain employees, including significant expenditures related to salaries and benefits and compensation expenses issued in connection to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. In addition, as we move into new jurisdictions, we will need to attract and recruit skilled employees in those new areas.
Risks Inherent in an Agricultural Business.
Our business involves the growing of cannabis, which is an agricultural product. The occurrence of severe adverse weather conditions, especially droughts or floods is unpredictable and may have a potentially devastating impact on agricultural production, and may otherwise adversely affect the supply of cannabis. Adverse weather conditions may be exacerbated by the effects of climate change and may result in the introduction and increased frequency of pests and diseases. The effects of severe adverse weather conditions may reduce our yields or require us to increase our level of investment to maintain yields. Additionally, higher than average temperatures and rainfall can contribute to an increased presence of insects and pests, which could negatively affect cannabis crops. Future droughts could reduce the yield and quality of our cannabis production, which could materially and adversely affect our business, financial condition and results of operations.
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The occurrence and effects of plant disease, insects and pests can be unpredictable and devastating to agricultural production, potentially rendering all or a substantial portion of the affected harvests unsuitable for sale. Even when only a portion of the production is damaged, our results of operations could be adversely affected because all or a substantial portion of the production costs may have been incurred. Although some plant diseases are treatable, the cost of treatment can be high and such events could adversely affect our operating results and financial condition. Furthermore, if we fail to control a given plant disease and the production is threatened, we may be unable to adequately supply our customers, which could adversely affect our business, financial condition and results of operations. There can be no assurance that natural elements will not have a material adverse effect on production.
Supply of Cannabis Seeds.
If for any reason the supply of cannabis seeds is ceased or delayed, we would have to seek alternate suppliers and obtain all necessary authorization for the new seeds. If replacement seeds cannot be obtained at comparable prices, or at all, or if the necessary authorizations are not obtained, our business, financial condition and results of operations would be materially and adversely affected.
Many of our competitors have greater resources that may enable them to compete more effectively than us in the cannabis industry.
The industry in which we operate is subject to intense and increasing competition. Some of our competitors have a longer operating history and greater capital resources and facilities, which may enable them to compete more effectively in this market. We expect to face additional competition from existing licensees and new market entrants who are granted licenses in Colombia, who are not yet active in the industry. If a significant number of new licenses are granted in the near term, we may experience increased competition for market share and may experience downward pricing pressure on our products as new entrants increase production. Such competition may cause us to encounter difficulties in generating revenues and market share, and in positioning our products in the market. If we are unable to successfully compete with existing companies and new entrants to the market, our lack of competitive advantage will have a negative impact on our business and financial condition.
Legal and Regulatory Proceedings.
From time to time, we may be a party to legal and regulatory proceedings, including matters involving governmental agencies, entities with whom it does business and other proceedings arising in the ordinary course of business. We will evaluate our exposure to these legal and regulatory proceedings and establish reserves for the estimated liabilities in accordance with generally accepted accounting principles. Assessing and predicting the outcome of these matters involves substantial uncertainties. Unexpected outcomes in these legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves, could have an adverse impact on our financial results.
Our participation in the cannabis industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by third parties, other companies and/or various governmental authorities against us. Litigation, complaints, and enforcement actions involving us could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on our future cash flows, earnings, results of operations and financial condition.
Ability to Establish and Maintain Bank Accounts.
There is a risk that banking institutions in countries where we operate will not open accounts for us or will not accept payments or deposits from proceeds related to the cannabis industry. Such risks could increase our costs or prevent us from expanding into certain jurisdictions.
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Insurance Coverage.
Our production is, in general, subject to different risks and hazards, including adverse weather conditions, fires, plant diseases and pest infestations, other natural phenomena, industrial accidents, labor disputes, changes in the legal and regulatory framework applicable to us and environmental contingencies.
We are in the process of obtaining insurance coverage over our production and facilities. We may not be able to maintain or obtain insurance of the type and amount desired at a reasonable cost. If we were to incur significant liability for which we were not fully insured, it could have an adverse effect on our business, financial condition and results of operations.
Protected Areas Established by the National System of Protected Areas.
Under Colombian laws, competent governmental authorities are not allowed to grant any type of cannabis licenses on properties that are located within areas registered as national parks or protected areas in the National System of Protected Areas (“SINAP”). Additionally, the Colombian government is entitled to create new protected areas based on their environmental relevance, which might result in the prohibition to conduct any type of activities on those areas or the need to obtain specific environmental authorizations or permits.
We do not operate in a protected area and we believe that we are not currently at risk of expropriation pursuant to the SINAP, but we cannot assure you that the areas in which we operate will not be subject to such risks in the future.
Changes in Corporate Structure.
Colombian cannabis licenses are granted on a non-transferable, non-exchangeable and non-assignable basis. Any breach of this restriction may result in the revocation of the license. While there are no specific regulations or restrictions regarding the effects of a change in control, modification of the corporate structure, issuance of shares, or any changes in holders or final beneficiaries on the cannabis licenses, these restrictions may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Emerging Market Risks.
Emerging market investment generally poses a greater degree of risk than investment in more mature market economies because the economies in the developing world are more susceptible to destabilization resulting from domestic and international developments. All of our operations are in Colombia, See “Risks Related to Operations in Colombia”.
Global Economy.
Financial and securities markets in Colombia are influenced by the economic and market conditions in other countries, including other South American emerging market countries. Although economic conditions in these countries may differ significantly from economic conditions in Colombia, international investors’ reactions to developments in these other countries, may substantially affect capital inflows into the Colombian economy, and the market value of securities of issuers with operations in Colombia.
Economic downturn or volatility could have a material adverse effect on our business, financial condition and results of operations. In addition, weakening of economic conditions could lead to reductions in demand for our products.  Further, weakened economic conditions or a recession could reduce the amount of income customers are able to spend on our products. In addition, as a result of volatile or uncertain economic conditions, we may experience the negative effects of increased financial pressures on our clients. For instance, our business, financial condition and results of operations could be negatively impacted by increased competitive pricing pressure, which could result in the incurrence of increased bad debt expense. If we are not able to timely and appropriately adapt to changes resulting from a weak economic environment, our business, results of operations and financial condition may be materially and adversely affected.
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We will need to grow the size of our organization, and we may experience difficulties in managing any growth we may achieve.
As our development and commercialization plans and strategies develop, we expect to need additional research, development, managerial, operational, sales, marketing, financial, accounting, legal and other resources. Future growth would impose significant added responsibilities on members of management. Our management may not be able to accommodate those added responsibilities, and our failure to do so could prevent us from effectively managing future growth and successfully growing our company.
We expect to incur significant ongoing costs and obligations related to our investment in infrastructure, growth, regulatory compliance and operations.
We expect to incur significant ongoing costs and obligations related to our investment in infrastructure and growth and regulatory compliance, which could have a material adverse impact on our results of operations, financial condition and cash flows. In addition, future changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to our operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on our business, results of operations and financial condition. Our efforts to grow our business may be costlier than we expect, and we may not be able to generate sufficient revenue to offset such higher operating expenses. We may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications and delays, and other unknown events.
We will need, but may be unable to, obtain additional funding on satisfactory terms, which could dilute our shareholders or impose burdensome financial restrictions on our business.
In the future, we hope to rely on revenues generated from operations to fund all of the cash requirements of our activities. However, there can be no assurance that we will be able to generate any significant cash from our operating activities in the future. Future financings may not be available on a timely basis, in sufficient amounts or on terms acceptable to us, if at all. Any debt financing or other financing of securities senior to the Common Shares will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition and results of operations because we could lose our existing sources of funding and impair our ability to secure new sources of funding. There can be no assurance that we will be able to generate any investor interest in our securities. If we do not obtain additional financing, our business may never commence, in which case you would likely lose the entirety of your investment in the Company.
Even if this Offering is successful, we will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.
The proceeds from this Offering, excluding potential proceeds from the sale of Warrant Shares upon exercise of all the Warrants, will be up to $30,000,000 before deducting offering expenses payable by us. We expect that if the maximum sale of Units is achieved, the net proceeds from this Offering will be sufficient to fund our current operations for at least the next twenty-four months. However, we may not achieve the maximum sale of Units and Warrant Shares, and/or our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances or a combination of these approaches. Raising funds in the current economic environment may present additional challenges. It is not certain that we have accounted for all costs and expenses of future development and regulatory compliance. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.
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Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities may dilute our existing shareholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
If you purchase our Units in this Offering, you will incur immediate and substantial dilution in the book value of your Units.
You will suffer immediate and substantial dilution in the net tangible book value of the Units you purchase in this Offering. Assuming an offering price of $0.75 per Unit and $1.00 per Warrant Share, and assuming all 40,000,000 Units are sold and all 20,000,000 Warrant Shares are issued for estimated net proceeds  of $48,857,000  (after deducting  estimated  offering expenses), purchasers of Units in this Offering will experience dilution of approximately  $0.46 per Unit in net tangible book value of the Units. In addition, investors purchasing Units in this Offering will contribute up to 97% of the total amount invested by shareholders since inception, but will only own approximately 46% of the Common Shares outstanding.
We have no minimum capitalization.
We do not have a minimum capitalization, and we may use the proceeds from this Offering immediately following our acceptance of the corresponding subscription agreements. We do not have any track record for self-underwritten Regulation A+ offerings and there can be no assurance the Maximum Offering or any other amount will be sold in this Offering. There is no assurance that we will raise sufficient capital solely from this Offering to implement our business plan, potentially resulting in greater operating losses unless we are able to raise the required capital from alternative sources. There is no assurance that alternative capital, if needed, would be available on terms acceptable to us, or at all.

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Risks Related to Operations in Colombia
Our operations are located in Colombia, which may make it more difficult for investors to understand and predict how changing market and economic conditions will affect our financial results.
Our operations are located in Colombia and, consequently, are subject to the economic, political and tax conditions prevalent in that country. The economic conditions in Colombia are subject to different growth expectations, market weaknesses and business practices than economic conditions in other markets. We may not be able to predict how changing market conditions in Colombia will affect our financial results.
As of the date of this Offering Circular, Colombia’s long-term foreign currency sovereign credit ratings were affirmed “Baa2” by Moody’s, “BBB-” by S&P and “BBB” by Fitch, three of the main rating agencies worldwide. The Colombian economy is expected to experience a modest recovery in growth in 2019, along with a decrease in the current account deficit and a marginal increase in debt in the coming three years. The stable outlook reflects their expectation that Colombia’s established political institutions and track record of consensus on key economic policies will contribute to economic stability and continuity over the coming two to three years.
Colombia’s economy, like most Latin-American countries, continues to suffer from the effects of lower commodity prices, mainly oil, reflected in its elevated level of external debt. Even though the country has taken measures to stabilize the economy, it is uncertain how these measures will be perceived and if the intended goal of increasing investor’s confidence will be achieved.
Economic and political conditions in Colombia may have an adverse effect on our financial condition and results of operations.
Our operations are located in Colombia. Consequently, our financial condition and results of operations depend significantly on macroeconomic and political conditions prevailing in Colombia. Decreases in the growth rate, periods of negative growth, increases in inflation, changes in law, regulation, policy, or future judicial rulings and interpretations of policies involving exchange controls and other matters such as (but not limited to) currency depreciation, inflation, interest rates, taxation, banking laws and regulations and other political or economic developments in or affecting Colombia may affect the overall business environment and may, in turn, adversely impact our financial condition and results of operations in the future. The Colombian government frequently intervenes in Colombia’s economy and from time to time makes significant changes in monetary, fiscal and regulatory policy. Our business and results of operations or financial condition may be adversely affected by changes in government or fiscal policies, and other political, diplomatic, social and economic developments that may affect Colombia. We cannot predict what policies the Colombian government will adopt and whether those policies would have a negative impact on the Colombian economy or on our business and financial performance in the future.
We cannot assure you whether current stability in the Colombian economy will be sustained. If the condition of the Colombian economy were to deteriorate, we would likely be adversely affected.
The Colombian Government and the Central Bank exercise significant influence on the Colombia economy.
Although the Colombian government has not imposed foreign exchange restrictions since 1990, Colombia’s foreign currency markets have historically been extremely regulated. Colombian law permits the Central Bank of Colombia (the “Central Bank”) to impose foreign exchange controls to regulate the remittance of dividends and/or foreign investments in the event that the foreign currency reserves of the Central Bank fall below a level equal to the value of three months of imports of goods and services into Colombia. An intervention that precludes our Colombian subsidiary from possessing, utilizing or remitting U.S. Dollars would impair our financial condition and results of operations, and would impair the Colombian subsidiary’s ability to convert any dividend payments to U.S. dollars.
17

The Colombian government and the Central Bank may also seek to implement new policies aimed at controlling further fluctuation of the Colombian peso against the U.S. dollar and fostering domestic price stability. The Central Bank may impose certain mandatory deposit requirements in connection with foreign-currency denominated loans obtained by Colombian residents. We cannot predict or control future actions by the Central Bank in respect of such deposit requirements, which may involve the establishment of a different mandatory deposit percentage. The U.S. dollar/Colombian peso exchange rate has shown some instability in recent years.
Colombia has experienced and continues to experience internal security issues that have had or could have a negative effect on the Colombian economy and our financial condition.
Colombia is subject to sustained internal security issues, primarily due to the activities of guerrilla groups, such as dissidents from the former Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia), or “FARC,” the National Liberation Army (Ejército de Liberación Nacional), or “ELN,” paramilitary groups, drug cartels and criminal gangs (Bacrim). In remote regions of the country with minimal governmental presence, these groups have exerted influence over the local population and funded their activities by protecting and rendering services to drug traffickers and participating in drug trafficking activities. Even though the Colombian government’s policies have reduced guerilla presence and criminal activity, particularly in the form of terrorist attacks, homicides, kidnappings and extortion, such activity persists in Colombia, and possible escalation of such activity and the effects associated with them have had and may have in the future a negative effect on the Colombian economy and on us, including on our customers, employees, results of operations and financial condition. The Colombian government commenced peace talks with the FARC in August 2012, and peace negotiations with the ELN began in November 2016. The Colombian government and the FARC signed a peace deal on September 26, 2016, which was amended after voters rejected it in the referendum held on October 2, 2016. The new agreement was signed on November 24, 2016 and was ratified by the Colombian Congress on November 30, 2016 and is being implemented after four years of negotiations. Pursuant to the peace agreements negotiated between the FARC and the Colombian government in 2016, the FARC occupies five seats in the Colombian Senate and five seats in the Colombian House of Representatives. The new deal clarifies protection to private property, is expected to increase the government’s presence in rural areas and bans former rebels from running for office in certain newly created congressional districts in post-conflict zones. As a result, during the transition process, Colombia may experience an increase in internal security issues, drug-related crime and guerilla and paramilitary activities, which may have a negative impact on the Colombian economy. Our business or financial condition could be adversely affected by rapidly changing economic or social conditions, including the Colombian government’s response to implementation of the agreement with FARC and ongoing peace negotiations, if any, which may result in legislation that increases the tax burden of Colombian companies.
18

Despite efforts by the Colombian government, drug-related crime, guerrilla paramilitary activity and criminal bands continue to exist in Colombia, and allegations have surfaced regarding members of the Colombian congress and other government officials having ties to guerilla and paramilitary groups. Although the Colombian government and ELN have been in talks since February 2017 to end a five-decade war, the Colombian government has suspended the negotiations after a series of rebel attacks. On January 17, 2019, a car with explosives burst through the gates at a police academy in Bogotá resulting in 21 people dead and many injured. The Colombian Defense Minister confirmed that the terrorist attack was perpetrated by the ELN. Any possible escalation in the violence associated with this terrorist attack and/or these activities may have a negative impact on the Colombian economy. In addition, the current administration has not honored the peace protocols to be applied in the event of a suspension of peace negotiations entered into by the prior administration, on the grounds that these protocols are only binding to the administration that agreed to them. This situation could result in escalated violence by the ELN and may have a negative impact on the credibility of the Colombian government which could in turn have a negative impact on the Colombian economy. Any terrorist activity in Colombia generally may disrupt supply chains and discourage qualified individuals from being involved with our operations.
Political and economic instability in the region may affect the Colombian economy and, consequently, our results of operations and financial condition.
Some of Colombia’s neighboring countries, particularly Venezuela, have experienced and continue to experience periods of political and economic instability. According to figures from the United Nations, more than two million Venezuelans have emigrated amid food and medicine shortages and profound political divisions in their country.  Approximately half of those migrants have opted to live in Colombia, and many have arrived with only what they could carry. Providing migrants with access to healthcare, utilities and education may have a negative impact on Colombia’s economy if the Colombian government is not able to respond adequately to legalize migrants, generate programs to help them find formal jobs, and increase tax revenue and consumption.
Moreover, diplomatic relations with Venezuela and Ecuador have from time to time been tense and affected by events surrounding the Colombian military forces’ confrontations with guerilla groups, particularly on Colombia’s borders with each of Venezuela and Ecuador. More recently, the Colombian government joined an international campaign against Nicolás Maduro asking him to relinquish power, which has further increased diplomatic tensions with Venezuela.
On November 19, 2012, the International Court of Justice placed a sizeable area of the Caribbean Sea within Nicaragua’s exclusive economic zone, which until then had been deemed by Colombia as part of its own exclusive economic zone. A worsening of diplomatic relations between Colombia and Nicaragua involving the disputed waters could result in the Nicaraguan government taking measures, or a reaction among the Nicaraguan public, which would be detrimental to Colombian-owned interests in that country.
Further economic and political instability in Colombia’s neighboring countries or any future deterioration in relations with Venezuela, Ecuador, Nicaragua and other countries in the region may result in the closing of borders, the imposition of trade barriers and a breakdown of diplomatic ties, or a negative effect on Colombia’s trade balance, economy and general security situation, which may adversely affect our results of operations and financial condition.
Finally, political conditions such as changes in the United States policies related to immigration and remittances could affect the regions in which we operate. Economic conditions in the United States and the region generally may be impacted by the new United States-Mexico-Canada Agreement. This could have an indirect effect on the Colombian economy and other countries in which we may operate.
19

Financial and Accounting Risks
Foreign Sales.
Our functional currency is denominated in U.S. dollars. We currently expect that sales will be denominated in Colombian pesos and may, in the future, have sales denominated in the currencies of additional countries in which we establish operations or distribution. In addition, we incur the majority of our operating expenses in Colombia Pesos. In the future, the proportion of our sales that are international may increase. Such sales may be subject to unexpected regulatory requirements and other barriers. Any fluctuation in the exchange rates of foreign currencies may negatively impact our business, financial condition and results of operations. We have not previously engaged in foreign currency hedging. If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets. In addition, those activities may be limited in the protection they provide from foreign currency fluctuations and can themselves result in losses.
Estimates or Judgments Relating to Critical Accounting Policies.
The preparation of financial statements in conformity with International Financial Reporting Standards issued by the International Accounting Standards Board requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the notes to our financial statements, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if the assumptions change or if actual circumstances differ from those in the assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our Common Shares. Significant assumptions and estimates used in preparing the financial statements include those related to the credit quality of accounts receivable, income tax credits receivable, share based payments, impairment of non-financial assets, fair value of biological assets, as well as revenue and cost recognition.
Tax Risks.
We and our subsidiary will operate and will be subject to income tax and other forms of taxation in multiple jurisdictions. Taxation laws and rates which determine taxation expenses may vary significantly in different jurisdictions, and legislation governing taxation laws and rates are also subject to change. Therefore, our earnings may be impacted by changes in the proportion of earnings taxed in different jurisdictions, changes in taxation rates, changes in estimates of liabilities and changes in the amount of other forms of taxation. We may have exposure to greater than anticipated tax liabilities or expenses. We may be subject to income taxes and non-income taxes in a variety of jurisdictions and our tax structure may be subject to review by both domestic and foreign taxation authorities and the determination of our provision for income taxes and other tax liabilities will require significant judgment. In addition, we may be subject to different taxes imposed by the Colombian government, and changes within such tax, legal and regulatory framework may have an adverse effect on our financial results.
Failure to develop our internal controls over financial reporting as we grow could have an adverse impact on us.
As our Company matures we will need to continue to develop and improve our current internal control systems and procedures to manage our growth. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish appropriate controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. In addition, management's assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management's assessment of our internal controls over financial reporting or disclosure of our public accounting firm's attestation to or report on management's assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Shares.
20

Risks Related to Our Securities
We intend to list our Common Shares for trading on a securities exchange, which would increase our regulatory burden; however, it is uncertain when our Common Shares will be listed on an exchange for trading, if ever.
We intend to seek a listing on the Canadian Stock Exchange (the “CSE”). Our Board of Directors, in its sole discretion, may choose to take actions necessary to list our Common Shares on a national securities exchange, but is not obligated to do so. As a result, our Common Shares sold in this Offering may not be listed on a securities exchange for an extended period of time, if at all. If our Common Shares are not listed on an exchange, it may be difficult to sell or trade in our Common Shares.
Although to date we have not been subject to the continuous and timely disclosure requirements of Canadian securities laws or other rules, regulations and policies of the CSE. We are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial management control systems to manage our obligations as a public company listed on the CSE. These areas include corporate governance, corporate controls, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal controls over financial reporting. However, we cannot assure holders of our shares that these and other measures that we might take will be sufficient to allow us to satisfy our obligations as a public company listed on the CSE on a timely basis. In addition, compliance with reporting and other requirements applicable to public companies listed on the CSE will create additional costs for us and will require the time and attention of management. We cannot predict the amount of the additional costs that we might incur, the timing of such costs or the impact that management's attention to these matters will have on our business.
There is no existing market for our Common Shares, and you cannot be certain that an active trading market or a specific share price will be established.
Prior to this Offering, there has been no public market for shares of our Common Shares. We cannot predict the extent to which investor interest in our Company will lead to the development of a trading market or how liquid that market might become. The Offering price for the Units has been arbitrarily determined by the Company and may not be indicative of the price that will prevail in any trading market following this Offering, if any. The market price for our Common Shares may decline below the Offering price, and our stock price is likely to be volatile.
Our executive officers and directors and their respective affiliates may continue to exercise significant control over our Company after this Offering, which will limit your ability to influence corporate matters and could delay or prevent a change in corporate control.
Our executive officers and directors currently represent beneficial ownership, in the aggregate, of approximately 36.8% of our outstanding Common Shares. Immediately following the completion of this Offering, and disregarding any Units that they purchase in this Offering, if any, the existing holdings of our executive officers and directors and their affiliates will represent beneficial ownership, in the aggregate, of approximately 19.8% of our outstanding Common Shares, assuming we sell the maximum number of Units offered in this Offering and issue 60,000,000 Common Shares (assuming 20 million Warrant Shares are issued) to the subscribers in the Offering. Please see “Security Ownership of Management & Certain Security Holders” on page 52 for more information. As a result, these shareholders may be able to influence our management and affairs and control the outcome of matters submitted to our shareholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets. These shareholders acquired their Common Shares for substantially less than the price of the Units being acquired in this Offering, and these shareholders may have interests, with respect to their Common Shares, that are different from those of investors in this Offering, and the concentration of voting power among one or more of these shareholders may have an adverse effect on the price of our Common Shares. In addition, this concentration of ownership might adversely affect the market price of our Common Shares by:
 
delaying, deferring or preventing a change of control of the Company;
 
impeding a merger, consolidation, takeover or other business combination involving the Company; or
 
discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.
21

Conflicts of Interest.
We may be subject to various potential conflicts of interest because of the fact that some of our officers and directors may be engaged in a range of business activities. In addition, our executive officers and directors may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to the Company. In some cases, our executive officers and directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to our business and affairs and that could adversely affect our operations. These business interests could require significant time and attention of our executive officers and directors.
We have broad discretion in how we use the proceeds of this Offering and may not use these proceeds effectively, which could affect our results of operations and cause the price of our Common Shares to decline.
We will have considerable discretion in the application of the net proceeds of this Offering. We intend to use the net proceeds from this Offering to fund our business strategy, including without limitation, new and ongoing research and development, cultivation and commercialization operations, offering expenses, working capital and other general corporate purposes, which may include funding for the hiring of additional personnel. As a result, investors will be relying upon management's judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of this Offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our shareholders. In addition, pending their use, we may invest the net proceeds from this Offering in a manner that does not produce income or that loses value.
We will incur increased costs as a result of our public reporting obligations, and our management team will be required to devote substantial time to new compliance initiatives.
We may become subject to the periodic reporting requirements for public reporting companies in the United States and Canada in the near future. Particularly after we are no longer an “emerging growth company,” we will continue to incur significant legal, accounting and other expenses that we have not incurred as a private company. Our management and other personnel would need to devote a substantial amount of time to comply with our reporting obligations. Moreover, these reporting obligations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
We may lose our status as a foreign private issuer in the United States, which would result in increased costs related to regulatory compliance under United States securities laws.
The Company will cease to qualify as a “foreign private issuer,” as defined in Rule 405 under the Securities Act and Rule 3b-4 under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), if, as of the last business day of our second fiscal quarter, more than 50 percent of our outstanding Common Shares are directly or indirectly owned by residents of the United States. If we determine that we fail to qualify as a foreign private issuer, the Company will cease to be eligible to avail itself of the forms and rules designated for foreign private issuers beginning on the first day of the fiscal year following such determination. Among other things, this will result in loss of the exemption from registration under the Exchange Act provided by Rule 12g3-2(b) thereunder, and, if the Company is required to register our Common Shares under section 12(g) of the Exchange Act, we will have to do so as a domestic issuer.  Further, any securities that we issue in unregistered or unqualified offerings both within and outside the United States will be “restricted securities” (as defined in Rule 144(a)(3) under the Securities Act), and will continue to be subject to United States resale restrictions notwithstanding their resale in “offshore transactions” pursuant to Regulation S under the Securities Act.  As a practical matter, this will likely require us to register more offerings of our securities under the Securities Act on either a primary offering or resale basis, even if they take place entirely outside the United States.  The resulting legal and administrative costs of complying with the resulting regulatory requirements are anticipated to be substantial, and to subject the Company to additional exposure to liability for which we may not be able to obtain insurance coverage on favorable terms or at all. 
22

If our stock price fluctuates after the Offering, you could lose a significant part of your investment.
The market price of our Common Shares could be subject to wide fluctuations in response to, among other things, the risk factors described in this section of this Offering Circular, and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable to us. Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our Common Shares. In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.
After the completion of this Offering, we may be at an increased risk of securities class action litigation.
Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If our stock price decreases and we were to be sued, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.
We do not intend to pay dividends on our Common Shares and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Common Shares.
We have never declared or paid any cash dividend on our Common Shares and do not currently intend to do so in the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. Therefore, the success of an investment in the Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares will depend upon any future appreciation in their value. There is no guarantee that the Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares will appreciate in value or even maintain the price at which you purchased them.
We may terminate this Offering at any time during the Offering Period.
We reserve the right to terminate this Offering at any time, regardless of the number of Units sold. In the event that we terminate this Offering at any time prior to the sale of all of the Units offered hereby, whatever amount of capital that we have raised at that time will have already been utilized by the Company and no funds will be returned to subscribers. 


23

DILUTION

As at the date of this Offering Circular, an aggregate of 70,000,000 Common Shares are issued and outstanding.

If you purchase Units in this Offering, your ownership interest in our Common Shares will be diluted immediately, to the extent of the difference between the price to the public charged for each Unit in this Offering and the net tangible book value per share of our Common Shares after this Offering.

Our net tangible book value as of June 30, 2019 was ($414,000), or ($0.01) per share, based on 70,000,000 outstanding Common Shares as of the date of this Offering Circular. Net tangible book value per share equals the amount of our total tangible assets less total liabilities, divided by the total number of Common Shares outstanding, all as of the date specified.

If the Maximum Offering, at an offering price of $0.75 per Unit and $1.00 per Warrant Share, is sold in this Offering, after deducting approximately $1,143,000 in offering expenses payable by us, our pro forma as adjusted net tangible book value at June 30, 2019 would be approximately $48,671,000, or $0.37 per share. This amount represents an immediate increase in pro forma net tangible book value of $0.38 per share to our existing shareholders as of the date of this Offering Circular, and an immediate dilution in pro forma net tangible book value of approximately $0.46 per share to new investors purchasing Units in this Offering at a price of $0.75 per Unit.
 
The following table illustrates the approximate per share dilution to new investors discussed above, assuming the sale of, respectively, 100%, 75%, 50% and 25% of the Units and the Warrant Shares offered for sale in this Offering (after deducting our estimated offering expenses of $1.1 million):

Funding Level
 
$
48,857,000
   
$
36,582,000
   
$
24,307,500
   
$
12,302,000
 
Offering Price per Unit
 
$
0.75
   
$
0.75
   
$
0.75
   
$
0.75
 
Offering Price per Warrant Share
 
$
1.00
   
$
1.00
   
$
1.00
   
$
1.00
 
Weighted Average Price per Unit and Warrant Share
 
$
0.83
   
$
0.83
   
$
0.83
   
$
0.83
 
Pro forma net tangible book value per Common Share before the Offering
 
$
(0.01
)
 
$
(0.01
)
 
$
(0.01
)
 
$
(0.01
)
Increase per Common Share attributable to investors in this Offering
 
$
0.38
   
$
0.33
   
$
0.25
   
$
0.15
 
Pro forma net tangible book value per Common Share after the Offering
 
$
0.37
   
$
0.31
   
$
0.24
   
$
0.14
 
Dilution to investors after the Offering
 
$
0.46
   
$
0.52
   
$
0.59
   
$
0.69
 


24

The following tables set forth, assuming the sale of, respectively, 100%, 75%, 50% and 25% of the Units offered for sale in this Offering, the total number of shares previously sold to existing shareholders as of October 10, 2019, including shares issued for services, the total consideration paid for the foregoing (based on cash actually received and the value of shares issued for services), and the respective percentages applicable to such purchased shares and consideration paid based on an average price of $0.02 per share paid by our existing shareholders or as the value of shares issued for services and $0.75 per Unit paid by investors in this Offering.

 
 
Units Purchased
 
Total Consideration
 
 
Number
 
Percentage
 
Amount
 
Percentage
 
Assuming 100% of Units Sold:
               
Existing Shareholders
   
70,000,000
     
54
%
 
$
1,400,000
      3 %
New Investors
   
60,000,000
     
46
%
 
$
50,000,000
      97
%
Total
   
130,000,000
     
100
%
 
$
51,400,000
     
100
%

 
Units Purchased
 
Total Consideration
 
 
Number
 
Percentage
 
Amount
 
Percentage
 
Assuming 75% of Units Sold:
               
Existing Shareholders
   
70,000,000
     
61
%
 
$
1,400,000
     
4
%
New Investors
   
45,000,000
     
39
%
 
$
37,500,000
     
96
%
Total
   
115,000,000
     
100
%
 
$
38,900,000
     
100
%

 
Units Purchased
 
Total Consideration
 
 
Number
 
Percentage
 
Amount
 
Percentage
 
Assuming 50% of Units Sold:
               
Existing Shareholders
   
70,000,000
     
70
%
 
$
1,400,000
     
5
%
New Investors
   
30,000,000
     
30
%
 
$
25,000,000
     
95
%
Total
   
100,000,000
     
100
%
 
$
26,400,000
     
100
%

 
Units Purchased
 
Total Consideration
 
 
Number
 
Percentage
 
Amount
 
Percentage
 
Assuming 25% of Units Sold:
               
Existing Shareholders
   
70,000,000
     
82
%
 
$
1,400,000
      10
%
New Investors
   
15,000,000
     
18
%
 
$
12,500,000
     
90
%
Total
   
85,000,000
     
100
%
 
$
13,900,000
     
100
%

The foregoing tables and calculations exclude (i) 7,000,000 Common Shares issuable upon exercise of stock options outstanding which are exercisable at an exercise price of $0.05 per share, (ii) 7,000,000 Common Shares issuable upon exercise of common share purchase warrants outstanding which are exercisable at an exercise price of $0.05 per share and (iii) Warrant Shares issuable upon the exercise of Warrants and any proceeds therefrom.
25


PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS

The Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares are being offered pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended (the “Securities Act”), for Tier 2 offerings, by the management of the Company on a “best-efforts” basis directly to purchasers who satisfy the requirements set forth in Regulation A. We have the option in our sole discretion to accept less than the minimum investment. We have no minimum capitalization, and we may use the proceeds from this Offering immediately following our acceptance of the corresponding subscription agreements towards our business strategy, facility expenses, research and development expenses, offering expenses (which include legal, accounting, printing, due diligence, marketing, selling and other costs incurred in the Offering), working capital, general corporate purposes, and other uses, as more specifically set forth in the “Use of Proceeds to Issuer” starting on page 27. There is no arrangement for the return of funds to investors if all of the Units offered are not sold in the Offering.

Our Offering will expire on the first to occur of (a) the sale of all 40,000,000 Units offered hereby, (b) ________ __, 2021 or (c) when our Board of Directors elects to terminate the Offering.

There is no arrangement to address the possible effect of the Offering on the price of our Common Shares.

We reserve the right to offer the Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares through broker-dealers who are registered with FINRA.  The Company has engaged Dalmore Group, LLC ("Dalmore"), a New York limited liability company and broker-dealer registered with the SEC and a member of FINRA, to provide broker-dealer services in seven specified states, including Washington, Arizona, Texas, Alabama, North Dakota, Florida and New Jersey, in connection with this Offering.  Dalmore's services include the review of investor information, including Know Your Customer data, Anti-Money Laundering and other compliance checks, and the review of subscription agreements and investor information.  As compensation for these services, the Company has agreed to pay Dalmore a one-time setup fee in the amount of $25,000, plus a 3% commission on the aggregate amount raised by the Company in this Offering in the specified states, as described in the Broker-Dealer Agreement between the Company and Dalmore.

Generally speaking, Rule 3a4-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer's securities. None of our officers or directors are subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. None of our officers or directors will be compensated in connection with their participation in the Offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. None of our officers or directors are, or have been within the past 12 months, a broker or dealer, and none of them are, or have been within the past 12 months, an associated person of a broker or dealer. At the end of the Offering, our officers and directors will continue to primarily perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Our officers and directors will not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on Exchange Act Rule 3a4-1(a)(4)(i) or (iii), except that for securities issued pursuant to Rule 415 under the Securities Act, the 12 months shall begin with the last sale of any security included within one Rule 415 registration.

We may be required to retain a broker-dealer or register as an issuer-dealer and/or agent under the blue sky laws of certain states in order to make offers to sell our Units in those states. There can be no guarantee that we will be approved as an issuer-dealer and/or agent in any or all of the states which we determine require such registration.
 
Selling Security Holders
 
No securities are being sold for the account of security holders; all net proceeds of this offering will go to the Company.
 
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USE OF PROCEEDS TO ISSUER
 
The maximum gross proceeds from the sale of our Units in this Offering is $50,000,000 (including the proceeds from the issuance of all Warrant Shares upon exercise of Warrants issued in this Offering). The net proceeds from the total maximum offering are expected to be approximately $48,857,000, after the payment of offering costs (including legal, accounting, printing, due diligence, marketing, selling and other costs incurred in the Offering). Our estimated offering costs of $1,143,000 include a deduction of 3% of the total gross proceeds for commissions payable to Dalmore on all the Units being offered. We note that this is a conservative estimate, as the 3% commission will only be paid on investments in the seven states where Dalmore is engaged to provide broker-dealer services (Washington, Arizona, Texas, Alabama, North Dakota, Florida and New Jersey), although the Company intends to offer Units in all states within the United States and in certain provinces of Canada (and other non-U.S. jurisdictions). The estimate of the budget for offering costs is an estimate only and the actual offering costs may differ. We expect from time to time to evaluate the acquisition of businesses, intellectual property, products and technologies for which a portion of the net proceeds may be used.  The following table represents management's best estimate of the uses of the net proceeds, assuming the sale of, respectively, 100%, 75%, 50% and 25% of the Units offered for sale in this Offering.

 
       
Percentage of Offering Sold
       
 
   
100%

   
75%

   
50%

   
25%

Construction of facilities and equipment
 
$
10,000,000
   
$
8,000,000
   
$
8,000,000
   
$
4,000,000
 
Complete licensing and permitting at new facilities
 
$
1,000,000
   
$
1,000,000
   
$
1,000,000
   
$
1,000,000
 
Cosechemos operational expenditures
 
$
6,000,000
   
$
6,000,000
   
$
6,000,000
   
$
3,000,000
 
Recruit and implement sales team
 
$
1,500,000
   
$
900,000
   
$
600,000
   
$
400,000
 
Research and Development
 
$
5,800,000
   
$
4,800,000
   
$
1,900,000
   
$
1,328,500
 
General and Administrative
 
$
6,100,000
   
$
6,100,000
   
$
6,007,000
   
$
2,003,500
 
Execute marketing and branding campaigns
 
$
3,000,000
   
$
2,000,000
   
$
800,000
   
$
300,000
 
Strategic acquisitions and related capital expenditures
 
$
15,457,000
   
$
7,782,000
   
$
-
   
$
-
 
TOTAL
 
$
48,857,000
   
$
36,582,000
   
$
24,307,000
   
$
12,032,000
 

The Company has a very limited operating history. Our plan of operations for the next few years includes: successfully completing the Pilot Project, expanding our cultivation to 100 hectares at the Cosechemos Farm, building the requisite infrastructure at the Cosechemos Farm, including 1 hectare of nursery and propagation centres and the Research Technology and Processing Centre; developing, executing and monitoring sales and marketing campaigns, identifying strategic partners and consumers in Colombia and export partners internationally, building the requisite infrastructure at the Palagua Farms, expanding our cultivation to the initial 50 hectares at the Palagua Farms and acquiring businesses currently in the Company’s pipeline.  The amounts set forth above are our current estimates for such development activities, and we cannot be certain that actual costs will not vary from these estimates. Our management has significant flexibility and broad discretion in applying the net proceeds received in this Offering and making short-term interest-bearing investments of the proceeds for capital preservation purposes. We cannot assure you that our assumptions, expected costs and expenses and estimates will prove to be accurate or that unforeseen events, problems or delays will not occur that would require us to seek additional debt and/or equity funding, which may not be available on favorable terms, or at all. See “Risk Factors” starting on page 10 for more information regarding the risks associated with an investment in our securities.

The Company intends to use a portion of the proceeds raised in this Offering to fund the compensation payable to its officers, as described under “Compensation of Directors and Executive Officers” below. The Company may, in its discretion, pay its directors cash compensation and compensate them with the proceeds of the Offering.
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This expected use of the net proceeds from this Offering represents our intentions based upon our current financial condition, results of operations, business plans and conditions. As of the date of this Offering Circular, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the closing of this Offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this Offering and reserves the right to change the estimated allocation of net proceeds set forth above.

Although our business does not presently generate any cash, we believe that if we raise the maximum amount in this Offering, that we will have sufficient capital to finance our operations for at least the next 24 months. However, if we do not sell the maximum number of Units offered in this Offering, or if our operating and development costs are higher than expected, we will need to obtain additional financing prior to that time. Further, we expect that during or after such 24-month period, we will be required to raise additional funds to finance our operations until such time that we can conduct profitable revenue-generating activities.


Pending our use of the net proceeds from this Offering, we may invest the net proceeds in a variety of capital preservation investments, including without limitation short-term, investment grade, interest bearing instruments and United States government securities and including investments in related parties. We may also use a portion of the net proceeds for the investment in strategic partnerships and possibly the acquisition of complementary businesses, products or technologies, although we have no present commitments or agreements for any specific acquisitions or investments.
 
DESCRIPTION OF BUSINESS

Corporate Structure

Flora Growth Corp. (the “Company,” “Flora”, “we,” “our,” and “us”) was incorporated on March 13, 2019 in the Province of Ontario. Flora is a private company headquartered in Canada with a focus on cultivating, processing and supplying all natural, medicinal-grade cannabis oil extracts and related products to large channel distributors, including pharmacies, medical clinics, and cosmetic companies.

Our business operations are in Colombia. Our registered office and its head office is located at 65 Queen Street West, Suite 800, Toronto, Ontario M5H 2M5. We have one 90% owned operating subsidiary, Cosechemos Ya S.A.S. (“Cosechemos”), which operates its business of cultivation and processing all natural cannabis into standardized, medicinal-grade oil extracts and related products. Cosechemos became a subsidiary of the Company effective October 2, 2019 pursuant to share purchase agreement between Flora, Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa.

Pursuant to our articles of incorporation (our “Articles”), we are authorized to issue an unlimited number of Common Shares. As of October 10, 2019, we had 70,000,000 Common Shares issued and outstanding.
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Intercorporate Relationships
We have one 90% owned subsidiary, Cosechemos, incorporated under the laws of Colombia and has its registered office address at Carrera 25 # 29 - 87 Local 17 A, Giron, Santander, Colombia.
     
 
Flora Growth Corp.
(Ontario)
 
   
 
        90%  
       
 
Cosechemos Ya S.A.S.
(Colombia)
 

Cosechemos became our 90%-owned subsidiary effective October 2, 2019, pursuant to the Share Purchase Agreement, by and among us and Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa.   Pursuant to the Share Purchase Agreement, we acquired 4,500 shares of Cosechemos (which is equivalent to 90% of the issued and outstanding shares of Cosechemos).  As consideration for the Cosechemos shares, we (i) paid $80,000 to the Vendors, and (ii) granted the Vendors a 10% non-dilutive, free carried interest in Cosechemos.

The Free Carry will automatically terminate upon such time as we invest an aggregate of $25 million into Cosechemos.  Upon the termination of the Free Carry, the Vendors will be required, if needed by Cosechemos, to fund the operations of Cosechemos on a pro rata basis or risk having their equity interest in Cosechemos be diluted.  Additionally, we are required to pay the Vendors, as a one-time payment, $750,000 within 60 days of Cosechemos earning a net income of $10 million.

Narrative Description of the Business

Flora is a private company headquartered in Canada with a focus on cultivating, processing and supplying all natural, medicinal-grade cannabis oil extracts and related products to large channel distributors, including pharmacies, medical clinics, and cosmetic companies. Our 90% owned subsidiary, Cosechemos, is a fully licensed and permitted cultivator, producer, and distributor of CBD medical cannabis in Colombia for: (a) use in Colombia; and (b) international export.  On August 22, 2019, Cosechemos applied to the Ministry of Justice for a Psychoactive Cannabis Cultivation License and on August 14, 2019 Cosechemos applied to the Ministry of Health and Social Protection (the “Ministry of Health”) for its cannabis manufacturing license. Cosechemos expects to receive these licenses by the end of 2019.

 
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Our cultivation operations are in Giron, Santander, Colombia, where Cosechemos has leased the Cosechemos Farm, a 361 hectare property, and the Palagua Farms, a 1,900 hectare property, to host the entirety of its operations, from the seed stage to the processing stage.  The equatorial location of its facilities offers Cosechemos the opportunity to cultivate the highest quality cannabis flowers and produce correspondingly high quality oil extracts through combination of a consistent and natural 12 hour sunlight/darkness light cycle, along with the expertise provided by the Cosechemos workforce drawn from Colombia’s cut flower industry. Cosechemos also benefits from the natural light cycle through minimal energy requirements, providing the potential for an extremely low carbon production footprint and high production cost efficiency.
We have initiated a 2 hectare Pilot Program at the Cosechemos Farm.  Pursuant to the Pilot Program, We have constructed one nursery and propagation center (an aggregate of 1,000 square meters) at the Cosechemos Farm wherein Flora has planted 7,800 seedlings of non-psychoactive cannabis.  Once the plants have strengthened and developed a healthy root structure, the plants will be planted in lots on the Cosechemos Farm for a total of two hectares of planted crops. We expect to harvest, dry, trip and process the non-psychoactive cannabis from the Pilot Program in November/December of 2019.  Once the Pilot Program has been completed, we will start planting 100 hectares of non-psychoactive cannabis at the Cosechemos Farm (the “Stage 1 Grow”). The Cosechemos Farm is a 361 hectare property.
Following the successful completion of the Stage 1 Grow and subject to the Company having adequate financing and demand for the Company’s products, Cosechemos intends to expand its operations by cultivating non-psychoactive cannabis at the Palagua Farms.  Initially, we intend to use 50 hectares for the cultivation of cannabis at the Palagua Farms.  Following the successful cultivation of the first 50 hectares at the Palagua Farms, we can cultivate up to an additional 1,850 hectares at the Palagua Farms.
Our Products and Services

Cosechemos is focused on cultivating, processing and supplying all natural, medicinal-grade cannabis oil, cannabis oil extracts and related products to large channel distributors, including pharmacies, medical clinics, and cosmetic companies.
Cosechemos is currently in the process of cultivating medicinal cannabis at the Cosechemos Farm in Giron, Colombia for a variety of medical conditions. Cosechemos currently has registered 12 varieties of cannabis. See “Operations - Strains of Cannabis”.
The development of these strains enables the selection of mother plants and identification of the concentrations of cannabinoids required for the formulations in which we intend to distribute. Upon completion of the construction of its Research Technology and Processing Centre, the cannabis will be produced in accordance with good manufacturing practice (GMP) Standards. We are committed to developing final products consistent with medicinal cannabis industry standards and pharmaceutical procedures. Our products will include a variety of THC and CBD compositions designed to treat specific medical conditions.  Currently, we are authorized to grow only non-pyschoactive cannabis (less than 1% THC) but we expect to obtain a psychoactive cannabis license (higher than 1% THC) by Q4 2019.  Upon obtaining the psychoactive cannabis license, the composition of the strains grown we grow will include a wide range of THC and CBD ratios. We are currently evaluating various delivery methods to its target demographic of pharmacies, medical clinics, and cosmetic companies.
Our non-psychoactive cannabis license allows us to produce and distribute CBD dominant cannabis oils and derivative products. This provides a strong base for our operations as the recently established medicinal cannabis market in Colombia develops and matures, and opportunities in Colombia’s low THC non-psychoactive cannabis over-the-counter markets arise.
Our CBD dominant cannabis products will mainly be focused on addressing the medicinal cannabis needs of prospective Colombian patients with conditions potentially suitable for treatment with medical cannabis. Such conditions include anxiety, insomnia, anorexia, chronic pain, epilepsy, chemotherapy-induced nausea and vomiting, post-traumatic stress disorder (PTSD), Parkinson’s disease, Tourette syndrome, irritable bowel syndrome (IBS) and spasticity associated with multiple sclerosis (MS) and spinal cord injury (SCI)1. Prohibition Partners2 estimates the need for medical cannabis production in Colombia to treat pain and pain symptoms of 4.5 million patients domestically as well as 60 million patients in Latin America suffering from conditions such as cancer, multiple sclerosis and epilepsy. In Colombia alone, it is estimated that more than 2.2 million people suffer with chronic pain, some 475,000 suffer post-traumatic stress disorder and another 520,000 have insomnia.
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Operations
Method of Production
We are currently in the process of growing a variety of cannabis strains for specific patient ailments. We have developed initial processing procedures for mature plants with the objective of distributing products through a variety of market channels in Colombia and potentially internationally. We will utilize stringent quality assurance and quality control measures to ensure that its products are consistent with medicinal cannabis industry standards.
We have initiated a 2 hectare pilot program (the “Pilot Program”) at the Cosechemos Farm.  Pursuant to the Pilot Program, we have constructed one nursery and propagation center (an aggregate of 1,000 square meters) wherein we have planted 7,800 seedlings of non-psychoactive cannabis.  Once the plants have strengthened and developed a healthy root structure, the plants will be planted in lots on the Cosechemos Farm for a total of two hectares of planted crops. We expect to harvest, dry, trip and process the non-psychoactive cannabis from the Pilot Program in November/December of 2019.  Once the Pilot Program has been completed, we will start to plant 100 hectares of non-psychoactive cannabis. The Cosechemos Farm is a 361 hectare property. 100 hectares of the Cosechemos Farm will be used to grow and cultivate cannabis, with the remainder of the Cosechemos Farm used to host the requisite facilities and infrastructure, including the Nursery and Propagation Centre, storage warehouse, technical and administrative offices, employee quarters, fertilization booth, post-harvest (drying and curing centre), a water reservoir and the Research Technology and Processing Centre.
Following the successful cultivation of 100 hectares at the Cosechemos Farm, adequate financing and subject to demand for the Company’s products, Cosechemos intends to expand its operations by cultivating non-psychoactive cannabis at the Palagua Farms.

Subject to the Company obtaining adequate financing, we intend to construct the following facilities at the Cosechemos Farm by the of Q3 2020:
Nursery and Propagation Centre
We intend to build 1 hectare of open-air greenhouses capable of supplying more than 45,000 rooted cuttings per week from 17,000 mother-plants, the estimated number eventually required to support a planned 100-hectare cultivation and harvesting operation at the Cosechemos Farm.
Warehouse
We intend to construct a 3,000 m2 warehouse for the housing and storage of all equipment required at the Cosechemos Farm.

1 Paradigm Capital – Medicinal Cannabis Industry Report (April 2018)
2 Prohibition Partners – The LATAM Cannabis Report (October 2018)

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Technical and administrative office
We intend to construct a 3,000 m2 office for its technical and administrative team.
Housing for Technical Team
We intend to construct a 100m2 residential quarters to host its technical team.  Four members of our technical team will reside at the Cosechemos Farm to ensure that its crops have constant surveillance.
Fertilization Centre
We intend to construct a 1,500 m2 fertilization center which shall contain all of the fertilization infrastructure and equipment needed for the Cosechemos Farm, including pumping system, filters and automation tanks.
Water Reservoir
We intend to construct a 1 hectare water reservoir which shall have a capacity of 30,000 mof water.  The water reservoir will be filled with water from the underground water aquifer.
Research Technology and Processing Centre
We intend to construct a 1.5 hectare Research Technology and Processing Centre. The Research Technology and Processing Centre will contain facilities to: (i) dry flowers naturally as well as using drying machines; (ii) a milling area; (iii) extraction areas; and (iv) an area designed for testing for levels of THC and CBD and physical-chemical analyzes of the soil, pathological plants and multiplication of beneficial microorganisms. Once complete, it must be certified by INVIMA to ensure that it meets GMP standards.
Production
The nursery and propagation center has one primary function, to develop and propagate a steady stream of genetically stable cuttings (clones) that will supply our cultivation lots, which in turn root and cultivate the cuttings into flowering plants that eventually yield the harvested cannabis flower that is sent for processing into standardized, medicinal-grade oil extracts at our planned state-of-the-art oil processing center.
These outbound cuttings, destined for contract cultivation, are hand-culled from populations of mother plants, which will occupy a dominant percentage, of approximately 75% of the overall nursery and propagation center’s open-air greenhouse planting capacity. The mothers supply all of the feeder stock cannabis cuttings to be cultivated at the Cosechemos Farm.
Not only do the mother plants supply genetically stable varieties of cuttings, they themselves also originated as harvested cuttings from grandmother plants. As the cloning process perfectly replicates plant genetics, the genetics of the mother plants mirror those of the grandmother plants from which they were harvested.
After extensive laboratory and field propagation testing only a select few plants determined to possess superior genetics are selected to be grandmothers. To ensure the genetic consistency of future generations of grandmother plants (and by extension future mother plants), tissue culture harvested from the grandmother plants is stored in an onsite tissue culture lab. In other words, when the entire population of grandmother plants needs to be replaced with new grandmothers, which is required approximately every six months, it is replaced with its own genetic offspring via tissue culture propagation.
32

Cultivation and Processing
The non-psychoactive cannabis produced as part of the Pilot Project will be processed at our current processing center which is located on the Cosechemos Farm.  Until the Research Technology and Processing Centre is constructed, the CBD oil from the Pilot Project will be extracted in a temporary non-certified facility located at the Cosechemos Farm.
The construction of the Research Technology and Processing Centre that Cosechemos will use to produce cannabis is targeted to commence by the first half of 2020. Once completed, the Research Technology and Processing Centre must be certified by INVIMA in order to ensure that it meets GMP Standards.
GMP Standards require a system in place that ensures that products are consistently produced and controlled according to quality standards. GMP Standards are designed to minimize the risks involved in any pharmaceutical, food, cosmetics, and production that cannot be eliminated through testing the final product. GMP Standards implement standards for all facets of production including materials, premises, equipment, training and personal hygiene of staff. Detailed written procedures are essential for each process that could affect the quality of the finished product. In addition, systems must be implemented to provide documented proof that correct procedures are consistently followed at each step in the manufacturing process, every time a product is made.
Location
The Cosechemos Farm is in Giron, Santander, Colombia. Giron’s tropical rainforest climate has an average daily temperature of 23.79°C (74.82°F) throughout the year with virtually no variation. Giron consistently receives 12 hours and 10 minutes of daylight, year-round, with very little variability, important for cannabis cultivation. Rainfall is abundant in Giron, with the probability of precipitation at some point ranging between 43% and 67% throughout most of the year (8.3 months), and usually a light to moderate breeze, which is ideal for controlling humidity and moisture levels within open-air greenhouses.
Giron’s location and infrastructure are well suited to supply international markets as it is 10 kilometers from Palonegro International Airport.
The Palagua Farm is located in Puerto Boyacá, Departamento de Boyacá, Colombia. Puerto Boyacá’s rainforest has an average daily temperature of 27.83°C (82.09°F) throughout the year with a small variation of +/- 2.5°C (or 77°F to 86°F) with temperatures higher from September to October and lower from December to January. Puerto Boyacá, on average, receives 12 hours and 7 minutes of daylight, excellent for multiple cannabis cultivation cycles in a year. Rainfall is abundant in Puerto Boyacá, with the probability of precipitation ranging between 31% and 80% throughout most of the year with an average monthly precipitation of 68%. Puerto Boyacá has a light breeze year-round which is ideal for controlling humidity levels within open-air greenhouses.
Puerto Boyacá’s location and infrastructure are well suited to supply international markets as it is a river-port town located by the Magdalena River, a principal river of Colombia, and is in close proximity to the airports of Puerto Perales and Puerto Nare.
Colombia is one of the world’s top cut flower producing regions. The skills of its many experienced horticultural workers are quickly transferable from flowers to cannabis. The cost of agricultural labour in Colombia is less than a quarter  of U.S. labour even with fair labour standards now in place throughout the industry to ensure safe and respectful working environments and fair wages.
Specialized Skills and Knowledge
Our board of directors and management team has strong experience enabling the team to operate a business of this nature including experience in horticulture, crop development, horticultural production techniques, produce manufacturing and international finance. Our board of directors and management team also has experience operating in the South American and Colombian business environment.
33

Sources of Materials
We intend to source the majority of its non-GMO feeder stock seed material through the legally established channels set forth by the Colombian government. Additionally, in certain situations where a specific strain is deemed to be important to developing a medical market formulation and domestic source plant material is not readily available, we may be required to import seeds from legally licensed international seed vendors.
Water for growing is obtained from an underground aquifer on the Cosechemos Farm and from a nearby river at the Palagua Farms. Soil is obtained from the property itself at each of the Cosechemos Farm and the Palagua Farms. Fertilizer is obtained from various suppliers based on the demand from the cultivation schedule.
Licenses
According to Colombian law, there are four types of cannabis licenses that authorize different activities concerning the various stages of the production line of the medicinal cannabis industry: (i) the Cannabis Seeds Possession License; (ii) the Psychoactive Cannabis Cultivation License; (iii) the Cannabis Non-Psychoactive Cultivation License; and (iv) the Cannabis Derivatives Manufacturing License. An overview of each license is provided below.
The legal framework currently in force in Colombia regarding medicinal cannabis is established in the Law 1787 of 2016 (the “Law”) and the Decree 613 of 2017 (the “Decree”). Based on the Law and the Decree, the Ministry of Health and the Ministry of Justice are the authorities entitled to issue the aforementioned licenses, in an estimated time of sixty (60) days.
It is important to note that, in compliance with its international obligations, Colombia establishes an annual limit for the production volume of cannabis plants and derivatives, which is monitored by the International Narcotics Control Board. Based on this limit, the Colombian Government established a quota system, in order to control the amount of psychoactive cannabis production per license. This means that under the Psychoactive Cannabis Cultivation and Manufacturing licenses, licensees must first apply for a specific crop or manufacturing quota, before beginning production. Such restriction is not applicable to non-psychoactive cannabis production, and therefore to Non-Psychoactive Cannabis Cultivation Licenses.
The current operations of Cosechemos do not require a Cannabis Seeds Possession License, Psychoactive Cannabis License or a Cannabis Derivatives Manufacturing License. Cosechemos currently has a Non-Psychoactive Cannabis Cultivation License.
Non-Psychoactive Cannabis Cultivation License
The Non-Psychoactive Cannabis Cultivation License is granted by the Ministry of Justice and is intended to authorize the cultivation of non-psychoactive cannabis plants for (i) seeds, cuttings and grain production, (ii) the manufacturing of derivatives, (iii) industrial purposes and (iv) scientific research purposes. Besides cultivation, licensees also have an authorization to store, commercialize, distribute and transport non-psychoactive cannabis plants, as well as dried cannabis flower.
34

Cosechemos applied for this license on September 6, 2019, and the Ministry of Justice granted it on May 15, 2019, through Resolution N° 484. The Cannabis Non-Psychoactive Cultivation License grants Cosechemos the right to cultivate non-psychoactive cannabis plants for: (a) grain and seeds production; (b) manufacturing of derivatives; and (c) industrial production.
The Cannabis Non-Psychoactive Cultivation License does not require a quota. The license is valid up to five (5) years and can be renewed for additional five year terms. The Colombian government maintains the right to monitor the activities performed by the corresponding licensee.
Psychoactive Cannabis Cultivation License
On August 22, 2019, Cosechemos applied for the Psychoactive Cannabis Cultivation License before the Ministry of Justice.  This license authorizes the cultivation of psychoactive cannabis plants for (i) seeds and cuttings production, (ii) grain production, (iii) the manufacture of derivatives and (iv) scientific research purposes. Besides cultivation, licensees also have an authorization to store, commercialize, distribute and transport psychoactive cannabis plants, as well as dried cannabis flower. Cosechemos expects to obtain this license in Q1 2020.
Cannabis Manufacturing License
On August 14, 2019, Cosechemos applied for the Cannabis Manufacturing License before the Ministry of Health.  This license authorizes the manufacture of psychoactive cannabis derivatives for (i) domestic commercialization, (ii) export, and (iii) scientific research purposes. Cosechemos expects to receive this license in Q1 2020.
Strains of Cannabis
Under article 2.8.11.11.1 of Decree 631 of 2018, licensed cannabis producers had the right to register before the Colombian Agricultural Institute (“ICA”), the genetics of any cannabis strain found in Colombia without having to declare or specify its origin, until December 31, 2018. This right, known as “Fuente semillera”, works a mechanism to legalize the sources of cannabis genetics already existing in Colombia, by allowing licensees to initiate the formal proceedings before the ICA, required to register such genetics in the Colombian National Plants Registry or “Registro Nacional de Cultivares.” In this sense, each strain registered as Fuente semillera belongs to each licensee, giving it the right to grow its own strands of cannabis as opposed to having to purchase registered strands from other licensed producers.
As of December 31, 2018, Cosechemos registered 12 varieties as its own Fuente semillera.  This registration enables Cosechemos to grow its own strands of cannabis as opposed to having to purchase registered strands from other licensed producers.
Seasonality
Colombia and its vertical offering of microclimates is the ideal country for year-round growing and processing of all possible varieties of cannabis in a natural, environmentally friendly manner.
35

Environmental
Under Colombian law, land ownership creates a presumption of liability for environmental damage in case of the breach of environmental laws, environmental damages, and the breach of an environmental license or any other administrative act issued by environmental authorities. Environmental authorities may investigate potential claims, authorize preventative measures, or impose sanctions to corporations for breaching environmental laws.
General principles of environmental law are set out in Law 99 of 1993. Moreover, article 9 of the National Code of Natural Resources and Protection of the Environment, issued through Decree 2811 of 1974, establishes the principles governing the use of natural resources, including, inter alia, that natural resources must be used without causing any harm to the interests of the community or third parties.
Any person, including corporations, that cause environmental damage while acting under the authority of a permit or environmental license, are responsible for the costs incurred on rectifying the damage. Environmental sanctions are independent from other civil and criminal penalties that may be imposed for the same action or damage. Therefore, environmental damage caused while a party is performing any activity without the required license constitutes a breach of Law 99 of 1993 and may lead to the imposition of sanctions, in addition to civil or criminal proceedings. Furthermore, Parties liable for environmental damage will also be required to carry out studies to assess the characteristics of the damage.
Political and Economic
Stable, Democratic Government
Colombia is a republic, characterized as a democratically elected representative system with a president as its head of state and head of the executive.  The Colombian legislature is made up of a 102-member Senate and a 166-member Chamber of Representatives. On June 17, 2018, Iván Duque Márquez of the right wing Centro Democrático (CD) was elected president. President-elect Duque took office on August 7, 2018.
Colombia has a multitude of political parties and coalitions divided along ideological or single issue lines. Changes in who holds political office at both the national and regional level is common.
Political conditions in Colombia are generally stable. However, large portions of the country remain in the control of armed groups, despite efforts to advance peace processes.
Market
We plan to distribute its product primarily in Colombia, although we will explore exportation to foreign countries as well. We intend to distribute its CBD dominant cannabis to medical clinics and pharmacies in Colombia. In addition, we will distribute our CBD dominant cannabis to cosmetic manufacturers who will incorporate it into their own products.
As of August 1, 2019, the population of Colombia is approximately 49.9 million people, making it the third largest populous nation in Latin America.  Over 90% of Colombia’s population lives in the northwest part of the country, with most Colombians living in urban centers. Currently, over 80.6% of the Colombian population lives in urban centers, a figure which is growing at an annual rate of 1.37%. Bogota is Colombia’s largest city, with a population of 8.3 million people, followed by Medellin with a population of 2.5 million people, and Cali with a population of 2.6 million people.
The Colombian economy has been steadily growing over the past three years, hovering around approximate real growth rates between 2% and 3%. Last year, the GDP of Colombia was $330.2 billion, with Colombia’s services sector comprising the largest portion of the economy. Colombia’s GDP per capita as of December 2018 was $7,698. The Colombian economy has seen inflation decline over the years from 7.5% in 2016, to 4.3% in 2017, 3.2% in 2018 and an expected rate of 3.4% in 2019.
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Colombia is part of, or is currently negotiating, Free Trade Agreements (“FTA”) with over a dozen countries. It is also a founder and current member of the Pacific Alliance, a trade bloc formed in 2012 with Chile, Mexico, and Peru.  In May 2018, it joined the Organisation for Economic Co-operation and Development (OECD). It did so after many reforms to align with OECD standards in areas such as: labour, justice system reform, corporate governance of state-owned enterprises, anti-bribery, and trade. Furthermore, Colombia is open to foreign direct investment (“FDI”). Since the 1990s, it has implemented several reforms to encourage FDI. These include lifting restrictions on the remittance of profits and capital, allowing foreign investments in most and providing for national treatment of foreign investors.
In conjunction with legalizing the use of marijuana, the Colombian government has embraced a model of licensing producers and distributors to manage the industry rather than issuing cards to consumers. It is estimated that there are currently about 3.2 million Colombian patients with conditions that can be treated with medical marijuana use. Additional research is being done collaboratively by the Colombian government, the private sector, and health professionals on how medical marijuana can further help treat Colombia’s medical patients.
Risks Faced by Foreign Companies Operating in Colombia
Although Colombia is generally open to FDI, foreign companies operating in Colombia face a number of risks. For example, while Colombia has a strong legal framework for commercial matters that defines the rights of businesses, reviews regulatory enforcement procedures and resolves contract disputes, the system is constrained by delays and corruption. A lack of coordination between government bodies and a lack of available resources have contributed to the delays. The time between when a plaintiff files a lawsuit and a resolution averages 1,288 days; the enforcement of an award granted due to an arbitration can take up to two years. Furthermore, high profile corruption cases continue to frequently arise despite many anti-corruption initiatives being implemented in the past eight years by outgoing president Juan Manuel Santos.
Furthermore, while FTAs, economic integration agreements, and other initiatives have streamlined the process for importing and exporting goods in Colombia, barriers to trade persist. For example, theft in both customs warehouses and of transportation trucks continues to be an issue. Additionally, customs officials can detain shipments indefinitely for errors ranging from incorrect tariff schedule classifications to typographical errors in paperwork.
Lastly, a lack of effective enforcement of labour law, particularly in rural areas, creates a reputational risk for foreign companies operating in Colombia. Moreover, decreases in the number of inspections of workplaces by government labour officials and the inability of inspectors to receive logistical assistance from employers and/or employees when accessing workplaces, are also concerns.
Marketing Plans and Strategies
We intend to sell medicinal cannabis in the domestic market in Colombia, although we will target foreign export, as and when other countries legalize medicinal cannabis products. The Colombian market allows for commercial production and distribution of medicinal cannabis products.
We will employ a hybrid business-to-business (“B2B”) and business-to-consumer (“B2C”) sales and distribution model. However, with respect to B2C channel sales, we do not plan to market its products directly to end consumers, but rather through channel distributors including medical clinics, pharmacies, and manufacturers of cosmetic products. Targeted B2B customers will primarily consist of finished goods manufacturers, research organizations and pharmaceutical companies.
We intend to support the entire marketing and sales process, develop the necessary knowledge to generate trust and encourage the proper use of the product by users. We will develop a final product with its own B2C brand and distribution and loyalty channel. Our B2C concept encompasses the design of our product to the distribution and loyalty of the final consumer and doctors who prescribe cannabis or recommend cannabis treatments. This will allow for value creation and customer loyalty of the product from both patients and doctors who prescribe our product. We will target our marketing efforts according to the needs and sizes of the markets, to meet expert leaders with marketing orientation and people with the orientation of a visitor or promoter who interact in the regions with the market players (e.g., doctors, patients, relatives, institutions, clinics, drugstores, distributors, etc.)
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We will strive to create allies within the healthcare process (clinics and doctors' offices) that formulate and believe in cannabis therapies. We will aim to create a network of doctors and related health personnel to meet the needs of the market and through a defined system know and manage the product with confidence and tranquility and at the same time distribute the product in an agile and safe way. We believe that new information technologies will be a key part of this strategy in order to have the market educated on the formulation trends of use and consumption of cannabis. These technologies will be used to educate the medical specialists of the selected branches (neurologists, psychiatrists, rheumatologists, oncologists, etc.) and create the necessary confidence so that the patients they attend have the possibility of receiving cannabis therapies as a complement to traditional therapies.
For each of the channels, and according to the product portfolio, we are developing a marketing and loyalty strategy by creating the materials and communications for these channels and their specific audiences – in the case of B2C, this would include doctors, patients, family members, regulatory entities and scientific associations, among others. Flora is developing marketing and commercial strategies focusing on the following topics:
marketing, strategic planning and sales tactics (line leaders, visitors and promoters);
scientific contents;
institutional relations;
customer service, after sales; and
information systems and management platform.

Additionally, we believe that, as global cannabis regulations continue to transform, Colombia may potentially legalize non-medicinal cannabis use following the example of countries such as Uruguay and Canada, which have both recently legalized adult-use recreational cannabis nationally. We believe that such an event would become a key factor for the Company’s future growth prospects, as such, we will continue to proactively monitor Colombia’s legal cannabis environment and plan accordingly for any potential changes to the country’s legal cannabis framework.
Competitive Conditions
The market for medicinal cannabis in Colombia is characterized by a structural shortage of supply, with few authorized producers of THC dominant cannabis. There are comparatively more producers of CBD dominant cannabis as production of CBD cannabis is not subject to the quota system in Colombia. Although competition in the market is growing, management believes that we are competitively positioned to capitalize on its early mover status and satisfy a significant portion of the market’s demand for medicinal cannabis.
Management expects that its experience and fundamental understanding of Colombia’s regulatory framework, the agricultural and scientific processes necessary to develop high quality and consistent medicinal cannabis products, will allow us to lead the Colombian medicinal cannabis marketplace.
The global cannabis industry is experiencing significant change as governments embrace regulatory reform, liberalizing the production and consumption of cannabis. It is possible that foreign corporations may enter the Colombian market as a result of Colombia’s regulatory regime, creating the prospect of Colombia becoming a hub for future industry development. In addition, we may face new competition for other licensed cannabis producers offering similar products to our products.
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Legal Proceedings

There are no current legal proceedings against the Company.

Employees/Consultants
 
We have eight part-time consultants located in Canada and five full-time employees in Colombia. We do not currently have any pension, annuity, profit sharing, or similar employee benefit plans, although we may choose to adopt such plans in the future.
 
We plan to engage contractors from time to time on an as-needed basis to consult with us on specific corporate affairs, or to perform specific tasks in connection with our business development activities.

Corporate Information
 
Our principal Toronto-based executive offices are located at 65 Queen Street West, Suite 800, Toronto, Ontario, M5H 2M5 Canada, and our telephone number is +1(416) 861-2267. Our website address is www.floragrowth.ca. The information contained therein or accessible thereby shall not be deemed to be incorporated into this Offering Circular.

DESCRIPTION OF PROPERTY

Leased Real Property

Pursuant to a lease agreement dated May 2, 2018, as amended, between C.I. Gramaluz S.C.A. and Cosechemos, Cosechemos has leased the Cosechemos Farm. The Cosechemos Farm is a 361 hectare property in Giron, Santander, Colombia.  The Company intends to use 100 hectares for the cultivation of cannabis at the Cosechemos Farm.  The Cosechemos Farm will also host the Nursery and Propagation Centre, storage warehouse, technical and administrative offices, employee quarters, fertilization booth, a water reservoir and the Research Technology and Processing Centre

Effective September 1, 2019, Cosechemos shall pay approximately $2,900 (COP10,000,000) a month to lease the Cosechemos Farm.  On March 1, 2020, the monthly fee shall be increased to approximately $5,800 (COP20,000,000).  Cosechemos has a right to purchase the Cosechemos Farm at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.
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Pursuant to an (i) option to lease agreement dated December 27, 2018 between Waldshut C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm I, and (ii) option to lease agreement dated December 27, 2018 between Vicalvaro C.V. and Cosechemos, Cosechemos the option to lease the Palagua Farm II. The Palagua Farm I is a 700 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm II is a 1,432 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm I and Palagua Farm II (collectively, the “Palagua Farms”) are contiguous to each other. The Palagua Farms are approximately 300 kilometers from the Cosechemos Farm.

Following the successful cultivation of the 100 hectares at the Cosechemos Farm, adequate financing and subject to demand for the Company’s products, Cosechemos intends to expand its operations by cultivating non-psychoactive cannabis at the Palagua Farms.

Pursuant to the option to lease agreements for the Palagua Farms, Cosechemos shall pay approximately $28.13 (COP$95,879) a month for each hectare of the Palagua Farms being used to cultivate cannabis by Cosechemos. Cosechemos is not required to make any payments until it commences its operations at the Palagua Farms.  Cosechemos has a right to purchase the Palagua Farms, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.

Following the successful cultivation of 100 hectares at the Cosechemos Farm, the Company intends to use 50 hectares for the of cultivation of cannabis at the Palagua Farms.  Following the successful cultivation of the first 50 hectares, the Company can cultivate up to an additional 1,850 hectares at the Palagua Farms. Cosechemos has a right to purchase the Palagua Farms, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.

The Palagua Farms will host similar facilities to the Cosechemos Farm, including a nursery and propagation centre, storage warehouse, technical and administrative offices, employee quarters, fertilization booth, a water reservoir and a research technology and processing centre.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of our operations together with the consolidated financial statements and notes thereto appearing elsewhere in this Offering Circular. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” starting on page 10, “Cautionary Statement Regarding Forward-Looking Statements” starting on page 4 and elsewhere in this Offering Circular. Please see the notes to our consolidated financial statements for information about our significant accounting policies, critical estimates, judgements and financial management and risk management.

OVERVIEW

The Company was incorporated on March 13, 2019 under the laws of the Province of Ontario, and is headquartered at 65 Queen Street West, Suite 800 in Toronto, Ontario, Canada. Effective October 2, 2019, the Company acquired 90% of Cosechemos.

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Cosechemos was established on May 12, 2016.  Cosechemos, is located in Colombia and is focused on cultivating, processing and supplying all natural, organic medicinal-grade cannabis oil, cannabis oil extracts and related products to large channel distributors, including pharmacies, medical clinics, and cosmetic companies. Cosechemos is a fully licensed and permitted cultivator, producer, and distributor of CBD medical cannabis in Colombia for: (a) use in Colombia; and (b) international export.  Cosechemos has (i) one property under lease, the Cosechemos Farm, in Giron, Santander, Colombia, and (ii) the option to lease the Palagu Farms, in Puerto Boyaca, Boyaca, Colombia. Our subsidiary's main operations are currently in Giron, Colombia.

The Cosechemos Farm is a 361 hectare property. The Palagua Farms is comprised of two contiguous farms for a total of 2,132 hectares.

On July 16, 2019, the Company signed a share purchase agreement with Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa, collectively, the “Vendors”, to purchase 90% of Cosechemos. Pursuant to the share purchase agreement, Flora acquired 4,500 shares of Cosechemos. As consideration for the Cosechemos shares, Flora (i) paid $80,000 to the Vendors, and (ii) granted the Vendors a 10% non-dilutive, free carried interest in Cosechemos, the (“Free Carry”). The Free Carry will terminate upon Flora investing an aggregate of $25,000,000 in Cosechemos. Upon the termination of the Free Carry, the Vendors will be required, if needed by Cosechemos, to fund the operations of Cosechemos on a pro rata basis or risk having their equity interest in Cosechemos be diluted. Pursuant to the agreement, Flora is required to pay the Vendors, as a one-time payment, $750,000 within 60 days of Cosechemos earning a net income of $10,000,000.
On October 2, 2019, the Company, Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa signed a shareholders’ agreement with Cosechemos, the legal and beneficial owner of 100% interest of non-psychoactive cannabis license in Colombia.

Pursuant to a lease agreement dated May 2, 2018, between C.I. Gramaluz S.C.A. and Cosechemos, Cosechemos has leased the Cosechemos farm, which is a 361 hectare property in Giron, Santander, Colombia. Effective September 1, 2019, Cosechemos shall pay approximately $2,900 (COP10,000,000) a month. On March 1, 2020, the monthly fee shall be increased to approximately $5,800 (COP20,000,000). Cosechemos has a right to purchase the Cosechemos Farm at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.
Pursuant to an (i) option to lease agreement dated December 27, 2018 between Waldshut C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm I, and (ii) option to lease agreement dated December 27, 2018 between Vicalvaro C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm II. The Palagua Farm I is a 700 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm II is a 1,432 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm I and Palagua Farm II (collectively, the “Palagua Farms”) are contiguous to each other. The Palagua Farms are approximately 300 kilometers from the Cosechemos Farm.  Pursuant to the option to lease agreements for the Palagua Farms, Cosechemos shall pay approximately $28.13 (COP$95,879) a month for each hectare of the Palagua Farms being used to cultivate cannabis by Cosechemos.

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Financial Condition and Results of Operations for the Period from March 13, 2019 (Incorporation) to June 30, 2019 for Flora Growth Corp.
Results of Operations
To date, Flora has not generated any revenues from its planned operations. For the period from incorporation on March 13, 2019 to June 30, 2019, Flora incurred a net loss of $1,899,714, consisting of consulting and management fees of $1,550,610, expenses related to travel to the property and promotion of the company of $219,613, professional fees of $19,309, promotional expenses of $24,312 and $85,870 related to share based compensation. The Company granted 7,000,000 founder warrants of the Company with an exercise price of $0.05 per common share. The fair market value of the warrants was estimated to be $Nil using the Black Scholes option pricing model. On June 28, 2019, the Company also granted 7,000,000 options to directors, officers and consultants of the Company with an exercise price of $0.05 per common share. The options vested immediately. The fair market value of the options was estimated to be $85,870 using the Black Scholes option pricing model.
The Company has and expects to continue to report negative earnings until the Company’s cannabis development program generates producing assets. The Company will continue to utilize proceeds from financing and equity issuances to fund its cannabis program and general and administrative operating costs.
As at June 30, 2019, the Company had no operating assets and expects to generate negative cash flow from operations for the foreseeable future.
Financial Condition and Results of Operations for the Year Ended December 31, 2018 for Cosechemos
Results of Operations
Cosechemos has not generated any revenues.  Cosechemos incurred a comprehensive loss of $141 for the period ending December 31, 2018 as compared with income of $95 for the period ending December 31, 2017.
Financial Condition and Results of Operations for the Six Months Ended June 30, 2019 for Cosechemos
Results of Operations
Cosechemos has not generated any revenues.  Cosechemos incurred a comprehensive loss of $2,833 for the period ending June 30, 2019, primarily relating to an expense of $577 related to income tax, $779 for travel expenses, $315 for interest expenses, $28 for amortization of the Company’s cannabis production license and lease commitment and other expenses of $1,295.
Cosechomos initiated a 2 hectare Pilot Program at the Cosechemos Farm. Pursuant to the Pilot Program, Cosechemos has constructed one nursery and a propagation center (an aggregate of 1,000 square meters) at the Cosechemos Farm wherein the Company planted 7,800 seedlings of non-psychoactive cannabis.  Once the plants have strengthened and developed a healthy root structure, the plants will be planted in lots on the Cosechemos Farm for a total of two hectares of planted crops.
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Liquidity and Capital Resources
As at June 30, 2019, the Company had a working capital deficit of $413,844. The Company’s primary cash flow needs are for the development of its cannabis activities, administrative expenses and for general working capital.
Cosechomos had cash of $nil at June 30, 2019. To date, Cosechemos has not generated any cash from operations. . Nominal amounts paid for taxes by Cosechemos were funded by a director’s loan from Oscar Franco. Cosechimos is owed $1,575 from the directors Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa for payment of their share capital. This is expected to be paid in the near term.
At present, the Company has no production and consequently no revenue generating assets or operations. The Company’s continued existence is dependent on its ability to obtain necessary financing to complete the development of its cannabis operations and/or other potential projects and attain future profitable production. At present, the Company has no established sources of income and the success of its growth and development programs will be contingent upon the Company’s ability to raise sufficient equity financing on favourable terms. The Company does not expect to generate any internal cash flows to finance the development costs in the foreseeable future.
In August 2019 the Company entered into a loan agreement with Copper One Inc. for an amount up to $500,000, of which $345,747 has been drawn down. The loan bears interest at 10% annually and is payable on demand. Stan Bharti and Deborah Battiston are the Executive Chairman and Chief Financial Officer of the Company and of Copper One, respectively. These funds have been utilized to fund activities at Cosochemos and to fund costs associated with the preparation and filing of this Offering Circular.
Although our business does not presently generate any cash, we believe that if we raise the maximum amount in this Offering we will have sufficient capital to finance our operations for at least the next 24 months; however, if we do not sell the Maximum Amount or if our operating and development costs are higher than expected, we will need to obtain additional financing. We do not have any track record for self-underwritten Regulation A+ offerings, and there can be no assurance we will raise the Maximum Amount or any other amount. Further, we expect that after such 24-month period, we will be required to raise additional funds to finance our operations until such time that we can conduct profitable revenue-generating activities. No assurances can be made that we will be successful in obtaining additional equity or debt financing, or that ultimately, we will achieve profitable operations and positive cash flow.
The Company does not pay dividends and, other than the debt discussed above, had no long-term debt or bank facilities as at June 30, 2019 and as at the date of this Offering Circular.
Plan of Operations
As noted above, the continuation of our current plan of operations requires us to raise significant additional capital. If we are successful in raising capital through the sale of Units offered for sale in this Offering, we believe that the Company will have sufficient cash resources to fund its plan of operations for the next 24 months. If we are unable to do so, we may have to curtail and possibly cease some operations. The Company intends to receive proceeds from the Offering to carry out its near term and longer-term goals.
For the next twelve months, the Company plans to operate the 2 hectare Pilot Program at the Cosechemos Farm.  Pursuant to the Pilot Program, the Company has constructed one nursery and propagation center (an aggregate of 1,000 square meters) at the Cosechemos Farm wherein the Company has planted 7,800 seedlings of non-psychoactive cannabis.  Once the plants have strengthened and developed a healthy root structure, the plants will be planted in lots on the Cosechemos Farm for a total of two hectares of planted crops. The Company expects to harvest, dry, trip and process the non-psychoactive cannabis from the Pilot Program in November/December of 2019.  Once the Pilot Program has been completed, Flora will start to plant 100 hectares of non-psychoactive cannabis at the Cosechemos Farm.
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We continually evaluate our plan of operations to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations.
Trend Information
Because we are still in the startup phase and have only recently commenced operations, we are unable to identify any recent trends in revenue or expenses. Thus, we are unable to identify any known trends, uncertainties, demands, commitments or events involving our business that are reasonably likely to have a material effect on our revenues, income from operations, profitability, liquidity or capital resources, or that would cause the reported financial information in this Offering to not be indicative of future operating results or financial condition.
Going Concern
The Company is in the preliminary stages of its planned operations and has not yet determined whether its processes and business plans are economically viable. The continued operations of the Company are dependent upon the ability of the Company to obtain sufficient financing to complete the development of its facilities and if they are proven successful, the existence of future profitable production, or alternatively, upon the Company’s ability to dispose of its assets on an advantageous basis, all of which are uncertain.

The Company’s financial statements have been prepared on a going concern basis, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company will need to raise additional capital in the near term to fund its ongoing operations and business activities. There can be no assurance that this Offering will conclude or that other financings will be available on terms acceptable to the Company or at all. As a result of these circumstances, there are material uncertainties that cast significant doubt as to the appropriateness of the going concern presumption.
The business of cannabis growth and development of Cannabidiol (“CBD”) oils involves a high degree of risk and there can be no assurance that current business development programs will result in profitable cannabis operations. The Company’s continued existence is dependent upon the acquisition of assets, preservation of its interest in the underlying assets, acquisition of various licenses, the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary, or alternatively upon the Company’s ability to dispose of its assets and operations on an advantageous basis.
The Company’s financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and classifications in the statement of financial position that may be necessary were the Company unable to continue as a going concern and these adjustments could be material.
Off Balance Sheet Arrangements

There are no off-balance sheet arrangements.

Relaxed Ongoing Reporting Requirements

Regulation A+ provides that a filer can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to avail ourselves of this exemption and, therefore, we will not be subject to the same adoption period for new or revised accounting standards as public companies.
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Upon the completion of this Offering, we may elect to become a public reporting company under the Exchange Act. If we elect to do so, we will be required to publicly report on an ongoing basis as an "emerging growth company" (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. As defined in the JOBS Act, an emerging growth company is defined as a company with less than $1 Billion in revenue during its last fiscal year. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies.
 
For so long as we remain an "emerging growth company," we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not "emerging growth companies," including but not limited to:

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
taking advantage of extensions of time to comply with certain new or revised financial accounting standards;
being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and
being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

If we are required to publicly report under the Exchange Act as an "emerging growth company", we expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an "emerging growth company" for up to five years, though if the market value of our Common Shares held by non-affiliates exceeds $700 Million, we would cease to be an "emerging growth company."

If we elect not to become a public reporting company under the Exchange Act, we will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A+ for Tier 2 issuers. The ongoing reporting requirements under Regulation A+ are more relaxed than for "emerging growth companies" under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semi-annual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer's fiscal year, and semi-annual reports are due within 90 calendar days after the end of the first six months of the issuer's fiscal year.


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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Name
 
Position
 
Age
 
 
Term of Office
 
 
Approximate hours per week
for part-time employees
Executive Officers:
 
 
 
 
 
 
 
 
 
 
Damian Lopez
 
President and Chief Executive Officer
 
 
36
 
 
 
March 2019 – Present
 
 
30
Deborah Battiston
 
Chief Financial Officer
 
 
61
 
 
 
March 2019 – Present
 
 
15
Orlando Bustos
 
VP Corporate Development
 
 
32
 
 
 
March 2019 – Present
 
 
30
Javier Franco
 
VP Agriculture
 
 
52
 
 
 
June 2019 – Present
 
 
N/A
Directors:
 
 
 
 
 
 
 
 
 
 
 
 
Stan Bharti
 
Executive Chairman
 
 
67
 
 
 
March 2019 – Present
 
 
N/A
Damian Lopez
 
Director
 
 
36
 
 
 
March 2019 – Present
 
 
N/A
Fred Leigh
 
Director
 
 
63
 
 
 
March 2019 – Present
 
 
N/A
William Steers
 
Director
   
66
     
July 2019 – Present
   
N/A

There is no arrangement or understanding between the persons described above and any other person pursuant to which the person was selected to his or her office or position.

Certain Relationships

Except as set forth above and in our discussion below in “Interest of Management and Others in Certain Transactions,” none of our directors or executive officers have been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

Business Experience

Damian Lopez, Chief Executive Officer and Director:

Damian Lopez has over 10 years of experience working in the Latin American market, including corporate finance, mergers and acquisitions and go-public transactions.  Mr. Lopez is a corporate securities lawyer who has worked with various Canadian and US publicly listed companies in the technology, resources and cannabis industries. At present, Mr. Lopez is legal counsel and corporate secretary of a number of Canadian public companies (2015 – present) as well as serving as Chief Executive Officer of Wolf Acquisition Corp, a TSX Venture Exchange listed capital pool company (2018 – present).  Previously, Mr. Lopez was the President, Chief Executive Officer, and Director of Valencia Ventures Inc. (2016 to 2018), a Canadian resource company and was a Corporate Associate at Stikeman Elliott LLP (2011 to 2015), a law firm, specializing in corporate and securities law. Mr. Lopez is fluent in English and Spanish and obtained a Juris Doctor from Osgoode Hall Law School and a Bachelor of Commerce & Finance from the University of Toronto.

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Deborah Battiston, Chief Financial Officer:

Deborah Battiston is a CPA-CGA, ICD.D from the University of Toronto’s Rotman School of Management and holds a BA in Economics from the University of Guelph. During the past five years, Ms. Battiston has been Chief Financial Officer of a number of Canadian Public Companies including, ARHT Media Inc., Copper One Inc., Sulliden Mining Capital Inc. and QMX Gold Corporation.  She has an extensive background with over 25 years of financial management which includes public companies, mergers and acquisitions, tax, and financing. Ms. Battiston also has broad experience with fast paced growth companies and infrastructure creation having managed the financial teams for many successful, international and domestic companies in the mining, technology, cannabis and other sectors.

Orlando Bustos, VP Corporate Development:

Orlando Bustos has several years of diverse financial and capital markets experience. Orlando brings experience in venture capital and investments from Forbes & Manhattan (F&M), a global private merchant bank (2016 – present). Additionally, Orlando worked closely with F&M’s portfolio companies on strategy and corporate development projects. Previously, Orlando worked in Deloitte’s Global M&A Group providing companies M&A, capital raising and strategic advisory (2014 – 2016). Orlando also held corporate finance roles in large international corporations including Nutrien, the largest agriculture company in Canada. Orlando obtained a BBA (Finance) with a Joint Major in Economics from the Beedie School of Business at Simon Fraser University.

Javier Franco, VP Agriculture:

Mr. Franco is a master horticulturist with more than 20 years of experience in the design, implementation and management of cultivation and propagation facilities for flowering plants in Latin America, mainly Colombia and Ecuador. Mr. Franco speaks English and Spanish fluently and obtained his agricultural studies at Zamorano University in Honduras and later an International Exchange Program at Ohio State University. Mr. Franco has managed technical, commercial and research groups in flower, fruit and vegetable markets in Latin America, and has participated in the commercial development of new technologies applied in agro-industry.  During the previous five years, Mr. Franco has been the director of agriculture for Tecnoviv SAS in Colombia.

Stan Bharti, Director:

Stan Bharti has more than 30 years of professional experience in business, finance, markets, operations, and more. His focus has been on the resource and technology sectors. He has amassed over $3 billion worth of investment capital for the junior companies that he has worked with, and for their shareholders. He is a Professional Mining Engineer and holds a Masters Degree in Engineering from Moscow, Russia and University of London, England. During the past five years, Mr. Bharti’s principal occupation has been as the Executive Chairman of Forbes & Manhattan, Inc. In addition, Mr. Bharti is a director of several public and private companies.

Fred Leigh, Director: 

Mr. Leigh has over 30 years of experience working with early stage companies and has had a significant role as founder, director and/or investor in many public companies. He is also the founder and President of Siwash, a privately held company which, for over 23 years has invested in early stage opportunities in the resource sector. Mr. Leigh’s principal occupation for the last five years has been as President of Siwash. Siwash was an early investor in successful companies such as, Wheaton River Minerals, Hathor Exploration and Blue Pearl Mining.  Mr. Leigh is an officer and director of various public companies including Halo Labs Inc., a leading cannabis extraction company listed on the NEO Exchange in Canada.

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William Steers, Director: 

Mr. Steers has over 40 years of international business development and management experience. While resident in Rio de Janeiro, he was a Director and senior manager of Docas Investimentos, a Brazilian controlled investment group involved in real estate, ship building, telecoms and more recently, oil and gas. Presently, and during the previous five years, Mr. Steers is a partner at IMC Consultoria Representacao Com. Int. Ltda. that among other activities, successfully introduced IMAX to Brazil.  Mr. Steers is an Independent Director of Brazilian oil and gas producer Petro Rio and Toronto based Lara Exploration Ltd. Formerly, Managing Partner at Weatherhaven Brasil (private manufacturer of temporary shelters). Mr. Steers holds an Honors BA from the Richard Ivey School of Business at Western University.
Involvement in Certain Legal Proceedings

To our knowledge, none of our current directors or executive officers have, during the past ten years:

 
 
• Been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
 
 
 
 
 
• had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he or she was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
 
 
 
 
 
• been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
 
 
 
 
 
• been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
 
 
 
 
 
• been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
 
 
 
 
 
• been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended (the Exchange Act)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, we believe will have a material adverse effect on our business, financial condition or operating results.
48

Board Leadership Structure and Risk Oversight
 
The Board oversees our business and considers the risks associated with our business strategy and decisions. The Board currently implements its risk oversight function as a whole. Each of the Board committees, when established, will also provide risk oversight in respect of its areas of concentration and reports material risks to the Board for further consideration.

Term of Office

Each of our officers holds office until his or her successor is elected and qualified. Directors are appointed to serve for one year until the meeting of the Board following the annual meeting of shareholders and until their successors have been elected and qualified. 
 
Director Independence
 
We use the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company's Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
 
 
 
• the director is, or at any time during the past three years was, an employee of the company;
 
 
 
• the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service);
 
 
 
 
 
• the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions);
 
 
 
 
 
• the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
  
 
 
 
 
• the director or a family member of the director is a current partner of the company's outside auditor, or at any time during the past three years was a partner or employee of the company's outside auditor, and who worked on the company's audit.

Under such definitions, Fred Leigh and William Steers are independent directors. However, our Common Shares are not currently quoted or listed on any national exchange or interdealer quotation system with a requirement that a majority of our Board be independent and, therefore, the Company is not subject to any director independence requirements.

Family Relationships
 
There are no familial relationships among any of our directors or officers.

Significant Employees

We do not have any significant employees other than our current directors and executive officers named herein.
49


COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The Company was formed in March 2019.  For the fiscal year ending December 31, 2019, we expect to compensate our highest paid officers and directors as follows:

Name and Capacity
Cash Compensation and Value of Shares issued for Service
 
 
Other Compensation
 
 
Total Compensation
 
 
 
 
 
 (1)
 
 
 
 
Damian Lopez (CEO//Director)
 
$
150,688
 
 
$
12,300
 
 
$
162,988
 
Deborah Battiston (CFO)
 
$
84,413
 
 
$
9,840
 
 
$
94,253
 
Orlando Bustos (VP Corp. Development)
 
$
38,138
 
 
$
12,300
 
 
$
50,438
 
Stan Bharti (Executive Chairman)
 
$
214,688
 
 
$
-
 
 
$
214,688
 
Fred Leigh (Director)
 
$
65,000
 
 
$
-
 
 
$
65,000
 
William Steers (Director)
 
$
-
 
 
$
12,300
 
 
$
12,300
 
 
 
 
(1)Any values reported in the “Other Compensation” column, if applicable, represents the aggregate grant date fair value, computed in accordance with Accounting Standards Codification (ASC) 718 Share Based Payments, of grants of stock options and warrants to each of our named executive officers and directors.

Director Compensation
 
We have four directors. We currently do not pay our directors any cash compensation for their services as board members. On June 28, 2019, certain of our directors acting at that time were each granted 2,000,000 options to purchase common stock of Flora at $0.05 per share.

Employment Agreements, Arrangements or Plans

The following describes the respective consulting agreements entered into by the Company and its executive officers in place as of the date hereof.

Stan Bharti

The Company has a contract with Mr. Stan Bharti (“Mr. Bharti”) for consulting services to the Company in his capacity as Executive Chairman, dated March 13, 2019, pursuant to which Mr. Bharti is entitled to compensation for the provision of such services of base fees of CAD$12,500 per month.  This agreement provides for a severance payment of 24 months’ base fees on termination by the Company without cause. This agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees.

In the event that there is a change in control of the Company, either Mr. Bharti or the Company shall have one year from the date of such change in control to elect to have this agreement terminated.  In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to Mr. Bharti that is equivalent to 36 months’ base fees plus an amount that is equivalent to all cash bonuses paid to Mr. Bharti in the 36 months prior to the change in control.  Following a change in control, all options granted to Mr. Bharti shall be dealt with in accordance with the terms of the Company’s stock option plan; however, all options granted to Mr. Bharti, but not yet vested, shall vest immediately. Similarly, following a change in control, all shares granted to Mr. Bharti under the Company’s share compensation plan, but not yet vested, shall vest immediately.
50


Damian Lopez

The Company has a contract with Damian Lopez Consulting Professional Corporation (“Lopez Procorp”), through an affiliated entity of Mr. Damian Lopez, for consulting services to the Company in Mr. Lopez’s capacity as Chief Executive Officer, dated March 13, 2019, pursuant to which Lopez Procorp is entitled to compensation for the provision of such services of base fees of CAD$12,500 per month.  This agreement provides for a severance payment of 36 months’ base fees on termination by the Company without cause. This agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees.

In the event that there is a change in control of the Company, either Lopez Procorp or the Company shall have one year from the date of such change in control to elect to have this agreement terminated.  In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to Lopez Procorp that is equivalent to 36 months’ base fees plus an amount that is equivalent to all cash bonuses paid to Lopez Procorp in the 36 months prior to the change in control.  Following a change in control, all options granted to Lopez Procorp shall be dealt with in accordance with the terms of the Company’s stock option plan; however, all options granted to Lopez Procorp, but not yet vested, shall vest immediately. Similarly, following a change in control, all shares granted to Lopez Procorp under the Company’s share compensation plan, but not yet vested, shall vest immediately.

Orlando Bustos

The Company has a contract with Mr. Orlando Bustos (“Mr. Bustos”) for consulting services to the Company in his capacity as VP Corporate Development, dated March 13, 2019, pursuant to which Mr. Bustos is entitled to compensation for the provision of such services of base fees of CAD$2,500 per month.  This agreement provides for a severance payment of 24 months’ base fees on termination by the Company without cause. This agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees.

In the event that there is a change in control of the Company, either Mr. Bustos or the Company shall have one year from the date of such change in control to elect to have this agreement terminated.  In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to Mr. Bustos that is equivalent to 36 months’ base fees plus an amount that is equivalent to all cash bonuses paid to Mr. Bustos in the 36 months prior to the change in control.  Following a change in control, all options granted to Mr. Bustos shall be dealt with in accordance with the terms of the Company’s stock option plan; however, all options granted to Mr. Bustos, but not yet vested, shall vest immediately. Similarly, following a change in control, all shares granted to Mr. Bustos under the Company’s share compensation plan, but not yet vested, shall vest immediately.

Deborah Battiston

The Company has a contract with Jadan Consulting Corporation (“Jadan”), an affiliated entity of Deborah Battiston, for consulting services to the Company in Ms. Battiston’s capacity as Chief Financial Officer, dated March 13, 2019, pursuant to which Jadan is entitled to compensation for the provision of such services of base fees of CAD$7,500 per month.  This agreement provides for a severance payment of 24 months’ base fees on termination by the Company without cause. This agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees.
51


In the event that there is a change in control of the Company, either Jadan or the Company shall have one year from the date of such change in control to elect to have this agreement terminated.  In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to Jadan that is equivalent to 36 months’ base fees plus an amount that is equivalent to all cash bonuses paid to Jadan in the 36 months prior to the change in control.  Following a change in control, all options granted to Jadan shall be dealt with in accordance with the terms of the Company’s stock option plan; however, all options granted to Jadan, but not yet vested, shall vest immediately. Similarly, following a change in control, all shares granted to Jadan under the Company’s share compensation plan, but not yet vested, shall vest immediately.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table shows the beneficial ownership of our Common Shares as of the date of this Offering Circular held by (i) each person known to us to be the beneficial owner of more than 10% of any class of our voting securities; (ii) each director who is the beneficial owner of more than 10% of any class of our voting securities; (iii) each executive officer who is the beneficial owner of more than 10% of any class of our voting securities; and (iv) all directors and executive officers as a group. As of October 10, 2019, there were 70,000,000 Common Shares issued and outstanding.
 
Beneficial ownership is determined in accordance with the rules of the SEC, and generally includes voting power and/or investment power with respect to the securities held. Common Shares subject to options and warrants currently exercisable or which may become exercisable within 60 days of the date of this Offering Circular, are deemed outstanding and beneficially owned by the person holding such options or warrants for purposes of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated in the footnotes to this table, the persons or entities named have sole voting and investment power with respect to all Common Shares shown as beneficially owned by them.

 Name and Address of Beneficial Owner
 
Amount and Nature of
Beneficial Ownership
 
Percent
of Class (1)
 
 
 
 
 
 
 
 
Directors and Officers:
 
 
 
 
 
 
 
 
 
 
 
 
 
All executive officers and directors as a group
 
25,750,
000(2) 
 
 
36.8%(2)
 
 
 
 
 
 
 
Greater than 10% Securityholders:
 
 
 
 
 
 
None
 
 
 
 
 
 
 
 
 
 
 
 
 
________ 
(1)
This Offering Statement does not contemplate that any of our current listed shareholders will acquire any additional Common Shares as part of this Offering.
(2)
Includes 3,800,000 shares of common stock issuable upon exercise of stock options and 7,000,000 shares of common stock issuable upon exercise of founder warrants held by executive officers and directors.


52

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

Transactions with Related Persons

The Company has a contract with Forbes & Manhattan, Inc. (“F&M”), of which Mr. Bharti is the Executive Chairman, for administrative and managerial services, dated March 14, 2019, pursuant to which F&M is entitled to compensation for the provision of such services of base fees of CAD$12,500 per month.  This agreement provides for a severance payment of 24 months’ base fees on termination by the Company without cause. This agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees.

In the event that there is a change in control of the Company, either F&M or the Company shall have one year from the date of such change in control to elect to have this agreement terminated.  In the event that such an election is made, the Corporation shall, within 30 days of such election, make a lump sum termination payment to F&M that is equivalent to 36 months’ base fees plus an amount that is equivalent to all cash bonuses paid to F&M in the 36 months’ prior to the change in control.  Following a change in control, all options granted to F&M shall be dealt with in accordance with the terms of the Company’s stock option plan; however all options granted to F&M, but not yet vested, shall vest immediately.

In August 2019 the Company entered into a loan agreement with Copper One Inc. for an amount up to $500,000, of which $345,747 has been drawn down. The loan bears interest at 10% annually and is payable on demand. Stan Bharti and Deborah Battiston are the Executive Chairman and Chief Financial Officer of the Company and of Copper One, respectively. These funds have been utilized to fund activities at Cosochemos and to fund costs associated with the preparation and filing of this Offering Circular.

Except as set forth above, there has not been, nor is there currently proposed, any transaction in which the Company or its subsidiary are or were a participant and the amount involved exceeds the lesser of $120,000 or 1% of the total assets as of October 10, 2019, and in which any of our directors, executive officers, holders of more than 5% of our Common Shares or any immediate family member of any of the foregoing had or will have a direct or indirect material interest, other than compensation arrangements, which include equity and other compensation, termination, change in control, consulting and other arrangements, which are described under "Compensation of Directors and Executive Officers."

Review, Approval and Ratification of Related Party Transactions
 
Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officer(s), director(s) and significant shareholders. We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof. On a moving forward basis, our directors will continue to approve any related party transaction.
 
SECURITIES BEING OFFERED

The following is a summary of the rights of our capital stock as provided in our Articles and Notice of Articles. For more detailed information, please see our Articles and Notice of Articles which have been filed as exhibits to the Offering Statement of which this Offering Circular is a part. 
 
General

The Company's Notice of Articles provide that our authorized capital consists of an unlimited number of Common Shares, without par value, which do not have any special rights or restrictions.

As of the date of this Offering Circular, the Company has 70,000,000 Common Shares issued and outstanding.

53

Rights, Preferences and Restrictions Attaching to Our Common Shares

The Business Corporations Act (Ontario) provides the following rights, privileges, restrictions and conditions attaching to our Common Shares:

to vote at meetings of shareholders, except meetings at which only holders of a specified class of shares are entitled to vote;
subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of our company, to share equally in the remaining property of our company on liquidation, dissolution or winding-up of our company; and
the Common Shares are entitled to receive dividends if, as, and when declared by the Board of Directors.
The provisions in our Articles attaching to our Common Shares may be altered, amended, repealed, suspended or changed by the affirmative vote of the holders of not less than two-thirds of the outstanding Common Shares.

With the exception of special resolutions (e.g. resolutions in respect of fundamental changes to our company, including: change of our company’s name, the sale of all or substantially all of our assets, a merger or other arrangement or an alteration to our authorized capital that is not allowed by resolution of the directors) that require the approval of holders of two-thirds of the outstanding Common Shares entitled to vote at a meeting, either in person or by proxy, resolutions to approve matters brought before a meeting of our shareholders require approval by a simple majority of the votes cast by shareholders entitled to vote at a meeting, either in person or by proxy.

Shareholder Meetings

The Business Corporations Act (Ontario) provides that: (i) a general meeting of shareholders shall be held at such place in or outside Ontario as the directors determine or, in the absence of such a determination, at the place where the registered office of our company is located; (ii) directors must call an annual meeting of shareholders not later than 18 months after the date of incorporation and no later than 15 months after the last preceding annual meeting; (iii) for the purpose of determining shareholders entitled to receive notice of or vote at meetings of shareholders, the directors may fix in advance a date as the record date for that determination, provided that such date shall not precede by more than 50 days or by less than 21 days, if we are a public company, otherwise 10 days, the date on which the meeting is to be held; (iv) the holders of not less than 5% of the issued shares entitled to vote at a meeting may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition; (v) only shareholders entitled to vote at the meeting, our directors and our auditor are entitled to be present at a meeting of shareholders; and (vi) upon the application of a director or shareholder entitled to vote at the meeting, the Superior Court of Justice may order a meeting to be called, held and conducted in a manner that the Court directs.

Pursuant to our Articles, the quorum for the transaction of business at a meeting of our shareholders is at least one person who is, or who represents by proxy, one or more shareholders who, in the aggregate, hold at least five percent of the issued shares entitled to be voted at the meeting.

Warrants

As of the date of this Offering Circular, the Company has a total of 7,000,000 founder Common Share purchase warrants issued and outstanding, which are exercisable at a price of $0.05 per share, subject to customary adjustments, over a 36-month exercise period following the date of issuance.

54


In this Offering, each Unit includes one Common Share and one-half of one Warrant. Each whole Warrant entitles the holder to purchase one Common Share at an exercise price of $1.00 per share, subject to customary adjustments, over an 18-month exercise period following the date of issuance.

Fully Paid and Non-assessable

All outstanding Common Shares are, and the Common Shares to be outstanding upon completion of this Offering will be, duly authorized, validly issued, fully paid and non-assessable.

Resale Restrictions

The Common Shares and Warrants will be separately transferable following the termination of any transfer hold periods under applicable law.

The securities to be issued in connection with the Offering will be subject to a statutory hold period in Canada in accordance with Section 2.5(2)(3)(ii) of National Instrument 45-102 – Resale of Securities, as follows: “Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months, and a day after the later of (i) [insert the distribution date], and (ii) the date the issuer became a reporting issuer in any province or territory.”

Purchasers under this Offering should consult with their own professional advisers with respect to restrictions on the transferability of the securities offered hereunder.

Penny Stock Regulation

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share. Such securities are subject to rules that impose additional sales practice requirements on broker-dealers who sell them. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, among other requirements, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. As our Common Shares immediately following this Offering may be subject to such penny stock rules, purchasers in this Offering will in all likelihood find it more difficult to sell their Common Shares in the secondary market.

Absence of Public Market

The Company, which currently has 22 shareholders, is an alternative reporting company under Regulation A+, Tier 2 of the Securities Act. There is no public trading market for the Common Shares of the Company. The Company currently expects, as an alternative reporting company, to qualify its Common Shares for quotation or listing on the CSE, NASDAQ or OTCQB (the Over the Counter Marketplace) or other secondary market for which the Company's Common Shares may then qualify in the discretion of the Board of Directors. (See Risk Factors starting on page 10).
55

 
WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a Regulation A+ Offering Statement on Form 1-A under the Securities Act with respect to the Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares offered hereby. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering Statement or the exhibits and schedules filed therewith. For further information about us and the Units, the Common Shares and Warrants of which the Units consist and the underlying Warrant Shares offered hereby, we refer you to the Offering Statement and the exhibits and schedules filed therewith. Statements contained in this Offering Circular regarding the contents of any contract or other document that is filed as an exhibit to the Offering Statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the Offering Statement. We are required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Securities Exchange Act of 1934. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.


56

PART F/S

INDEX TO FINANCIAL STATEMENTS

FLORA GROWTH CORP.
 
Page
Audited Financial Statements of Cosechemos Ya S.A.S. for the Years Ended December 31, 2018 and December 31, 2017 (Expressed in United States Dollars)
F-2
   
Independent Auditor's Report
F-3
   
Statements of Financial Position as of December 31, 2018 and December 31, 2017
F-6
   
Statements of Loss and Comprehensive Loss (Income) for the years ended December 31, 2018 and December 31, 2017
F-7
   
Statements of Shareholders' Equity for the years ended December 31, 2018 and December 31, 2017
F-8
   
Statements of Cash Flows for the years ended December 31, 2018 and December 31, 2017
F-9
   
Notes to the Financial Statements
F-10
   
Unaudited Condensed Interim Financial Statements of Cosechemos Ya S.A.S. for the three and six months ended June 30, 2019 and June 30, 2018 (Expressed in United States Dollars)
 F-27
   
Unaudited Condensed Interim Statements of Financial Position as of June 30, 2019 and December 31, 2018
F-28
   
Condensed Interim Statements of Loss and Comprehensive Loss for the three and six months ended June 30, 2019 and June 30, 2018
F-29
   
Condensed Interim Statements of Shareholders' Equity for the six months ended June 30, 2019 and June 30, 2018
F-30
   
Condensed Interim Statements of Cash Flows for the six months ended June 30, 2019 and June 30, 2018
F-31
   
Notes to the Condensed Interim Financial Statements
F-32
   
Audited Financial Statements of Flora Growth Corp. for the Period from Incorporation on March 13, 2019 to June 30, 2019 (Expressed in United States Dollars)
F-40
   
Independent Auditors’ Report
F-41
   
Interim Statement of Financial Position as of June 30, 2019
F-43
   
Interim Statement of Loss and Comprehensive Loss for the three months ended June 30, 2019 and for the period from incorporation on March 13, 2019 to June 30, 2019
F-44
   
Interim Statement of Changes in Shareholders' Equity for the period from incorporation on March 13, 2019 to June 30, 2019
F-45
   
Interim Statement of Cash Flows for the period from incorporation on March 13, 2019 to June 30, 2019
F-46
   
Notes to the Unaudited Interim Financial Statements for the period from incorporation on March 13, 2019 to June 30, 2019
F-47
   
Pro Forma Consolidated Financial Statements of Flora Growth Corp. (unaudited) as of December 31, 2018 and June 30, 2019 (Expressed in United States Dollars)
F-61
   
Pro-Forma Condensed Consolidated Statement of Financial Position as of June 30, 2019
F-62
   
Pro-Forma Condensed Consolidated Statement of Loss and Comprehensive Loss as of June 30, 2019 and December 31, 2018
F-63 and F-64
   
Notes to Pro-Forma Condensed Consolidated Financial Statements as of December 31, 2018
F-65

 
F-1

COSECHEMOS YA S.A.S.



FINANCIAL STATEMENTS

For the years ended December 31, 2018 and 2017


(Expressed in United States Dollars)



F-2


INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Shareholders of
Flora Growth Corp.

We have audited the financial statements of Cosechemos YA S.A.S. (the Company), which comprise the statement of financial position as of December 31, 2018 and 2017, and the statement of loss and comprehensive loss, statement of changes in equity and statement of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

Management’s Responsibility for the Financial Statements
 
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility
 
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
F-3



Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
Opinion
 
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).


Emphasis of Matter Regarding Key Audit Matters

Key Audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

1.
Compliance of transactions related with cannabis activities

We evaluate the validity of the transactions recognized in order to check the compliance of the company with all the legal requirements, in specific those regarding with the Cannabis Colombian regulation.

2.
Lease agreement

On May 2, 2018, a lease agreement was signed, between C.I. Gramaluz S.C.A. and Cosechemos YA S.A.S., of a 361-hectare property in Girón, Santander, Colombia in which the company will develop its activities. On September 1, 2019, an addendum to the contract was signed in which a grace period of 16 months was formalized with respect to the initial subscription date and new terms were established for the leases and an option to purchase the property to CI Gramaluz SCA
The net present value of this contract for the amount of COP 1,011,478,368 (US 315,531) was recognized in the financial statements of Cosechemos YA S.A.S. as of June 30, 2019 in accordance with the requirements of IFRS 16 as a right-of-use asset and a lease liability.


Emphasis of Matter Regarding Going Concern

Up to date, the Company is in the preliminary stages of its planned operations and has not yet determined whether its processes and business plans are economically viable. The financial statements have been prepared on a going concern basis, however, the Company will need to raise additional capital in the near term to fund its ongoing operations and business activities. The Company has entered into a share purchase agreement with Flora Growth Corp., nevertheless, is no assurance that this financing will conclude and there is also no assurance that other financings will be available on terms acceptable to the Company or at all. As a result of these circumstances, there are uncertainties that generate reasonable doubt about of the going concern presumption.

F-4



Emphasis of Matter Regarding Internal Control

Without prejudice to being in the prefeasibility stage, the Company must strengthen its administrative structure and internal processes in accordance with the most rigorous accepted standards, in order to promptly manage the risks arising from its operation in an appropriate manner. Specifically, the demanding level of regulation of Cannabis business activity established in Colombian legislation is a risk-enhancing factor which must be considered as a first order when structuring the Company's controls.


Emphasis of Matter Regarding Subsequent Event

As mentioned in Note 14, a Shareholders’ Agreement was signed, on July 16, 2019, which regulates the intentions of purchase 90% of interest of Cosechemos YA S.A.S. The Free Carry will terminate upon Flora Growth investing an aggregate of US$25,000,000 into the Company. Flora is offering up to 40,000,000 (the “Maximum Offering”) units (the “Units”) of the Company to be sold in the offering.






Luis Evaristo Ardila Chacón
Partner
RSM BG S.A.S.
Carrera 27 No. 36 – 14 Oficina 325, Bucaramanga - Colombia
October 9, 2019




F-5

COSECHEMOS YA S.A.S.
           
Statements of Financial Position
           
(Expressed in United States dollars)
           
 
           
As at:
 
December 31, 2018
   
December 31, 2017
 
 
           
ASSETS
           
Current
           
Amounts receivable (Note 5)
 
$
1,539
     
1,676
 
Prepaid expenses (Note 6)
   
3
     
1
 
Total assets
 
$
1,542
     
1,677
 
 
               
LIABILITIES
               
Current
               
Trade payables and accrued liabilities (Note 7)
 
$
14
     
8
 
Total liabilities
   
14
     
8
 
 
               
SHAREHOLDERS’ EQUITY
               
      Share capital (Note 8)
   
1,764
     
1,764
 
      Accumulated deficit
   
(11
)
   
(7
)
      Accumulated other comprehensive income
   
(225
)
   
(88
)
Total shareholders' equity
   
1,528
     
1,669
 
Total liabilities and shareholders’ equity
 
$
1,542
     
1,677
 
 
               
Nature and continuance of operations (Note 1)
Commitments and contingencies (Note 11)
Subsequent events (Note 14)


APPROVED BY

Signed: “Oscar Mauricio Franco Ulloa”, Legal representative

Signed: “Ernesto Erazo Cardona”, Certified Public Accountant, T.P 108159 – T, representing Mazars Colombia SAS
See accompanying notes to the financial statements
F-6


COSECHEMOS YA S.A.S.
Statements of Loss and Comprehensive Loss (Income)
           
(Expressed in United States dollars)
           
 
           
   
For the year ended
   
For the year ended
 
 
 
December 31, 2018
   
December 31, 2017
 
 
           
Expenses
           
Income tax expenses (Note 9)
 
$
4
   
$
7
 
                 
Net loss for the year
 
$
4
   
$
7
 
Other comprehensive income
               
Foreign currency translation
   
137
     
88
 
 
Comprehensive loss for the year
 
$
141
   
$
95
 
 
               
Basic and diluted loss per share
 
$
0.03
   
$
0.02
 
Weighted average number of common shares outstanding – basic and diluted
   
5,000
     
5,000
 



See accompanying notes to the financial statements


F-7

COSECHEMOS YA S.A.S.
                         
Statements of Shareholders' Equity
 
(Expressed in United States dollars)
                             
                               
 
                             
 
 
Share Capital
   
Accumulated Deficit
   
Accumulated Other Comprehensive Income
   
Shareholders’ Equity
 
     
#
   

$
   


   


   


 
 Balance, December 31, 2017
   
5,000
     
1,764
     
(7
)
   
(88
)
   
1,669
 
                                         
 Loss for the year
   
-
     
-
     
(4
)
   
-
     
(4
)
 Other comprehensive loss for the year
   
-
     
-
     
-
     
(137
)
   
(137
)
                                         
 Balance, December 31, 2018
   
5,000
     
1,764
     
(11
)
   
(225
)
   
1,528
 
                                         
Balance, December 31, 2016
   
5,000
     
1,764
     
-
     
-
     
1,764
 
                                         
 Loss for the year
   
-
     
-
     
(7
)
   
-
     
(7
)
 Other comprehensive loss for the year
   
-
     
-
     
-
     
(88
)
   
(88
)
                                         
 Balance, December 31, 2017
   
5,000
     
1,764
     
(7
)
   
(88
)
   
1,669
 


See accompanying notes to the financial statements


F-8



COSECHEMOS YA S.A.S
           
Statements of Cash Flows
(Expressed in United States dollars)
           
   
December 31, 2018
   
December 31, 2017
 
CASH FROM OPERATING ACTIVITIES:
           
Net loss for the year
 
$
(4
)
 
$
(7
)
Net change in non-cash working capital
   
4
     
7
 
Net cash flows from operating activities
   
-
     
-
 
                 
CHANGE IN CASH DURING THE PERIOD
   
-
     
-
 
                 
CASH, beginning of the year
   
-
     
-
 
                 
CASH, end of the year
 
$
-
   
$
-
 
                 

See accompanying notes to the financial statements
F-9

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)

1. NATURE AND CONTINUANCE OF OPERATIONS
Cosechemos YA SAS (the “Company” or “Cosechemos”), was established on May 12, 2016, according to private document of single shareholder No. 05-346798-16;  whose corporate purpose is to carry out research to develop services and products for the agricultural sector of the country or abroad as well as promote and implement projects related to the agricultural sector, develop and exploit activities related to the agricultural sector, and especially development technology for the Colombian field, export, import, market wholesale or retail all kinds of goods and services developed in the agricultural sector. The Company’s head office is located at Transversal 154 # 150 - 221 Office 304, Floridablanca, Santander, Colombia.

Going concern

The Company is in the preliminary stages of its planned operations and has not yet determined whether its processes and business plans are economically viable. The continued operations of the Company are dependent upon the ability of the Company to obtain sufficient financing to complete the development of its facilities and if they are proven successful, the existence of future profitable production, or alternatively, upon the Company’s ability to dispose of its assets on an advantageous basis, all of which are uncertain.

These financial statements have been prepared on a going concern basis, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company will need to raise additional capital in the near term to fund its ongoing operations and business activities. While the Company has entered into a share purchase agreement with Flora Growth Corp. (“Flora”), and Flora advanced loans and has engaged in an offering of units (see Note 14) there is no assurance that this financing will conclude. There is also no assurance that other financings will be available on terms acceptable to the Company or at all. As a result of these circumstances, there are material uncertainties that cast significant doubt as to the appropriateness of the going concern presumption.

The business of cannabis growth and development of Cannabidiol (“CBD”) oils involves a high degree of risk and there can be no assurance that current business development programs will result in profitable cannabis operations. The Company’s continued existence is dependent upon the acquisition of assets, preservation of its interest in the underlying assets, acquisition of various licenses, the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary, or alternatively upon the Company’s ability to dispose of its assets and operations on an advantageous basis.

These financial statements do not give effect to adjustments that would be necessary and could be material to the carrying values and classifications of assets and liabilities should the Company be unable to continue as a going concern.

2. BASIS OF PRESENTATION
The following is a summary of significant accounting policies used in the preparation of these financial statements.
Statement of compliance

These financial statements of the Company were prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The preparation of financial statements in accordance with International Accounting Standards (“IAS”) 1, Presentation of Financial Statements, requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company’s accounting policies.

Basis of presentation

The financial statements of the Company have been prepared on an accrual basis, except for cash flow information and are based on historical cost basis, except for certain financial instruments which are stated at their fair values. The financial statements are presented in United States dollars unless otherwise noted. These financial statements were approved and authorized by the Board of Directors of the Company on September 26, 2019.
F-10

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 

3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies used in the preparation of these financial statements for the year ended December 31, 2018 and 2017.
Foreign currency translation

The presentation currency is in United States Dollars and functional currency of the Company is the Colombian pesos. Transactions in foreign currencies are recorded in the functional currency at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rates. Non-monetary items are translated at the exchange rates in effect on the date of the transactions. Foreign exchange gains and losses arising on translation are presented in the statement of loss and comprehensive loss (income).

Cash

Cash and cash equivalents in the statement of financial position includes cash on hand and deposits held with banks that have a maturity of less than three months at the date they are acquired.

Property, plant and equipment

Items of property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the rehabilitation obligation, and for qualifying assets, borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset.

Property, plant and equipment are generally depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings                   25 - 40 years
Machinery                10 - 15 years
Vehicles                      3 - 5 years
Furniture and equipment           3 - 8 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of loss when the asset is derecognized. The assets’ residual values, useful lives and methods of depreciation/amortization are reviewed at each reporting period, and adjusted prospectively if appropriate.

Expenditures on major maintenance refits or repairs comprise the cost of replacement assets or parts of assets and overhaul costs. Where an asset or part of an asset that was separately depreciated and is now written off is replaced, and it is probable that future economic benefits associated with the item will flow to the Company through an extended life, the expenditure is capitalized.

Where part of the asset was not separately considered as a component, the replacement value is used to estimate the carrying amount of the replaced assets, which is immediately written off. All other day-to-day maintenance costs are expensed as incurred.

Impairment of non-financial assets

The carrying values of property, plant and equipment are assessed for impairment when indicators of such impairment exist. If any indication of impairment exists an estimate of the asset’s recoverable amount is calculated. The recoverable amount is determined as the higher of the fair value less costs to sell for the asset and the asset’s value in use.
F-11



COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 

3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of non-financial assets (continued)

Impairment is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets. If this is the case, the individual assets of the Company are grouped together into cash generating units (“CGUs”) for impairment purposes. Such CGUs represent the lowest level for which there are separately identifiable cash inflows that are largely independent of the cash flows from other assets.

If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired and an impairment loss is charged to the statement of loss so as to reduce the carrying amount to its recoverable amount.

A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset is increased to its recoverable amount. The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation/amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of loss.

Share capital

Proceeds from the issuance of common shares are classified as equity. Incremental costs directly attributable to the issue of common shares, stock options and warrants are recognized as a deduction from equity, net of any tax effects.

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Provisions

General
Provisions are recognized when (a) the Company has a present obligation (legal or constructive) as a result of a past event, and (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.
F-12


COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 

3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Provisions (continued)

The expense relating to any provision is presented in the statement of operations, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost in the statement of loss.

Decommissioning obligations
The Company records a liability for the fair value of legal or constructive obligations associated with the decommissioning of long-lived tangible assets in the period in which they are incurred. The decommissioning liability is recognized at the present value of the estimated future cash flow associated with the decommissioning of the applicable assets or properties. On recognition of the liability there is a corresponding increase in the carrying amount of the related asset known as the decommissioning cost, which is depleted on a unit-of-production basis over the life of the reserves. The liability is adjusted each reporting period to reflect the passage of time using the discount rate, with the interest charged to earnings, and for revisions to the estimated future cash flows. Actual costs incurred upon settlement of the obligations are charged against the liability.

As at December 31, 2018 and 2017, the Company did not have any material provisions, including decommissioning obligations.

Amounts receivable

Amounts receivable are amounts that are due from others in the normal course of business. If collection is expected in one year or less, they are classified as current assets; if not, they are presented as noncurrent assets and discounted accordingly.

Loss per share

Basic loss per share is calculated using the weighted average number of shares outstanding during the period. Diluted loss per share reflects the potential dilution of commons share equivalents, such as outstanding options and warrants, in the weighted average number of common shares outstanding during the period, if dilutive. The diluted loss per share calculation excludes any potential conversion of options and warrants that would be anti-dilutive.

Accounting policy under IFRS 9 applicable from January 1, 2018

Financial assets

Initial recognition and measurement

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either FVPL or FVOCI, and “financial assets at amortized costs”, as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost. Amounts receivable held for collection of contractual cash flows are measured at amortized cost.

Subsequent measurement – financial assets at amortized cost

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.
F-13

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 

3.    SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting policy under IFRS 9 applicable from January 1, 2018 (continued)

Financial assets (continued)

Subsequent measurement – Financial assets at FVPL

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the statement of financial position with changes in fair value recognized in other income or expense in the statement of loss. The Company does not measure any financial assets at FVPL.

Subsequent measurement – Financial assets at FVOCI

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income or loss in the statement of comprehensive loss (income). When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive income or loss and is not reclassified to profit or loss.

Dividends from such investments are recognized in other income in the statement of loss when the right to receive payments is established.

Derecognition

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.

Impairment of financial assets

The Company’s only financial assets subject to impairment are amounts receivable, which are measured at amortized cost. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable have been grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

Financial liabilities

Initial recognition and measurement

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. The Company’s financial liabilities include trade payables and accrued liabilities which are each measured at amortized cost.  All financial liabilities are recognized initially at fair value.

Subsequent measurement – financial liabilities at amortized cost

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.

F-14

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 

3.    SIGNIFICANT ACCOUNTING POLICIES (continued)

Subsequent measurement – Financial liabilities at FVPL

Financial liabilities measured at FVPL include any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial liabilities measured at FVPL are carried at fair value in the statement of financial position with changes in fair value recognized in other income or expense in the statement of loss.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the statement of loss.

Accounting policy under IAS 39 applicable prior to January 1, 2018

The accounting policy under IAS 39 for the comparative information presented in respect of financial assets and liabilities, excluding derivative instruments related to hedging activities, was similar to the accounting policy adopted in 2018, with the following exceptions.

Financial assets

Initial recognition and measurement

Non-derivative financial assets within the scope of IAS 39 were classified as “financial assets at fair value through profit or loss”, “loans and receivables”, or “available-for-sale financial assets”, as appropriate. The Company determines the classification of its financial assets at initial recognition.

Subsequent measurement – financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss included financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets were classified as held for trading if management intended to sell the financial assets in the short term. This category included any derivative financial instrument that was not designated as a hedging instrument in a hedge relationship under IAS 39.

Derivatives embedded in host contracts were accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks were not closely related to those of the host contracts. Host contracts were not held for trading or designated at fair value through profit or loss. These embedded derivatives were measured at fair value with changes in fair value recognized in the consolidated statements of operations. Reassessment only occurred if there was a change in the terms of the contract that significantly modified the cash flows that would have otherwise been required.

Impairment of financial assets

The Company assessed at each reporting date whether there was any objective evidence that a financial asset or a group of financial assets was impaired. A financial asset or a group of financial assets was deemed to be impaired if there were objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset (an incurred “loss event”) and the loss had an impact on the estimated cash flows of the financial asset or group of assets that could be reliably estimated.

For financial assets carried at amortized cost, the Company considered evidence of impairment at both a specific asset and collective level. Objective evidence could include the default or delinquency of a debtor or restructuring of an amount due to the Company on terms that the Company would not consider otherwise.

F-15

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 

3.    SIGNIFICANT ACCOUNTING POLICIES (continued)

All individually significant financial assets were assessed for specific impairment. Financial assets that were not individually significant were collectively assessed for impairment by grouping together financial assets with similar risk characteristics. If there were objective evidence that an impairment had incurred, the amount of the charge was recognized in the consolidated statements of operations and was measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that had not yet been incurred. If, in a subsequent period, the estimated impairment charge decreased because of an event, any reversal would have been credited to profit or loss.

New accounting pronouncements adopted

The Company has adopted the following amendments, effective January 1, 2018.

IFRS 9 – Financial Instruments: Recognition and Measurement (“IFRS 9”) introduces new requirements for the classification, measurement and impairment of financial assets and hedge accounting. It establishes two primary measurement categories for financial assets: (i) amortized cost and (ii) fair value either through profit or loss (“FVPL”) or through other comprehensive income (“FVOCI”); establishes criteria for the classification of financial assets within each measurement category based on business model and cash flow characteristics; and eliminates the existing held for trading, held to maturity, available for sale, loans and receivable and other financial liabilities categories. IFRS 9 also introduces a new expected credit loss model for the purpose of assessing the impairment of financial assets and requires that there be a demonstrated economic relationship between the hedged item and hedging instrument.

The following table shows the previous classification under IAS 39 and the new classification under IFRS 9 for the Company’s financial instruments:

Financial instrument classification
 
Under IAS 39
Under IFRS 9
Financial assets
   
Cash
Loans and receivables
Amortized cost
Amounts receivable
Loans and receivables
Amortized cost
     
Financial liabilities
   
Trade payables and accrued liabilities
Other financial liabilities
Amortized cost

The Company adopted IFRS 9 effective January 1, 2018 retrospectively without restating comparatives and therefore the comparative information in respect of financial instruments for the year ended December 31, 2017 was accounted for in accordance with the Company’s previous accounting policy under IAS 39. There were no effects on opening balances at January 1, 2018  with  respect  to  the  adoption  of IFRS 9.

Accounting pronouncements not yet adopted

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for accounting periods beginning on or after January 1, 2019 or later periods. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics.  The revised definition focuses on the idea that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.  The amendments are effective for annual reporting periods beginning on or after January 1, 2020.  Earlier adoption is permitted.
F-16


COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 

3.    SIGNIFICANT ACCOUNTING POLICIES (continued)

IFRS 3 – Business Combinations (“IFRS 3”) was amended in October 2018 to clarify the definition of a business.  This amended definition states that a business must include inputs and a process and clarified that the process must be substantive and the inputs and process must together significantly contribute to operating outputs.  In addition it narrows the definitions of a business by focusing the definition of outputs on goods and services provided to customers and other income from ordinary activities, rather than on providing dividends or other economic benefits directly to investors or lowering costs and added a test that makes it easier to conclude that a company has acquired a group of assets, rather than a business, if the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets.  The amendments are effective for annual reporting periods beginning on or after January 1, 2020.  Earlier adoption is permitted.

For acquisitions that do not meet the definition of a business under IFRS 3, the Company follows International Accounting Standard (“IAS”) 37 and IAS 38 guidelines for asset acquisition, where the consideration paid is allocated to assets acquired based on fair values on the acquisition date and transactions costs are capitalized and allocated to the assets acquired.

IFRS 16 - Leases (“IFRS 16”) was issued in January 2016. It replaces the previous leases Standard, IAS 17 Leases, and related Interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. It eliminates the current dual accounting model for leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with lessor accounting substantially unchanged from IAS 17. The amendments are effective for annual reporting periods beginning on or after January 1, 2019.  Earlier adoption is permitted.

For contracts entered into before January 1, 2019, the Company determined whether the arrangement contained a lease under IAS 17 Leases ("IAS 17") and its interpretive guidance. Prior to the adoption of IFRS 16, these leases were classified as operating or finance leases based on an assessment of whether the lease transferred significantly all the risks and rewards of ownership of the underlying asset.

Upon transition to IFRS 16, lease liabilities are measured at the present value of the remaining lease payments discounted by the Company's incremental borrowing rate as at January 1, 2019. Right-of-use assets and lease liabilities are recognized on the statement of financial position with the cumulative difference recognized in retained earnings. At transition, the Company has lease liabilities of $315,531 and right-of-use asset of $315,531 and are recognized in the statement of financial position.

For contracts entered into subsequent to January 1, 2019, at inception of the contract, the Company assesses whether a contract is, or contains, a lease by evaluating if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.  To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

The contract involves the use of an identified asset. This may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
The Company has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and
The Company has the right to direct the use of the asset. The Company has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
o
The Company as the right to operate the asset; or
o
The Company designed the asset in a way that predetermines how and for what purpose it will be used.

For contracts that contain a lease, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date.  The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted by any initial direct costs, and costs to dismantle and remove the underlying asset less any lease incentives.  The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term. The estimated useful lives of right-to-use assets are determined on the same basis as those of IAS 16, property, plant and equipment. Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets. This replaced the previous requirement to recognize a provision for onerous lease contacts.
F-17

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 
3.    SIGNIFICANT ACCOUNTING POLICIES (continued)

The lease liability is initially measured at the present value of lease payments to be paid subsequent to the commencement date of the lease, discounted either at the interest rate implicit in the lease or the Company's incremental borrowing rate.  The lease payments measured in the initial lease liability include payments for an optional renewal period, if any, if the Company is reasonably certain that it will exercise a renewal extension option.  The liability is measured at amortized cost using the effective interest method and will be remeasured when there is a change in either the future lease payments or assessment of whether an extension or other option will be exercised. The lease liability is subsequently adjusted for lease payments and interest on the obligation.  Interest expense on the lease obligation is included in the statement of loss.

4. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTIES
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results could differ from those estimates and these estimates could be material.

The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to:

Determination of functional currency

The Company determines the functional currency through an analysis of several indicators such as financing activities, cash flows from operating activities and frequency of transactions within the reporting entity.

Assets’ carrying values and impairment charges

In the determination of carrying values and impairment charges, management looks at the higher of recoverable amount or fair value less costs to sell in the case of assets and at objective evidence, significant or prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period.

Asset acquisition versus business combination

The determination of whether a transaction meets the definition of a business combination or constitutes an asset acquisition under IFRS 3.

Income, value added, withholding and other taxes

The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.

F-18

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 
4. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTIES (continued)
Income taxes and recoverability of potential deferred tax assets
In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. The Company considers relevant tax planning opportunities that are within the Company’s control, are feasible and within management’s ability to implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of the relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses unrecognized income tax assets at each reporting period.

Contingencies and provisions

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal proceedings that are pending against us, un-asserted claims, that may result in such proceedings or regulatory or government actions that may negatively impact our business or operations, the Company and its legal counsel evaluate the perceived merits of any legal proceedings or un-asserted claims or actions as well as the perceived merits of the nature and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or assessing the impact on the carrying value of assets. Contingent assets are not recognized in the financial statements.

5. AMOUNTS RECEIVABLE
   
December 31, 2018
   
December 31, 2017
 
Amounts receivable
 
$
1,539
   
$
1,676
 
Total
 
$
1,539
   
$
1,676
 

As of December 31, 2018, and 2017, the Company's amounts receivable corresponds to amounts receivable from founders since the incorporation of the Company.

6. PREPAID EXPENSES
   
December 31, 2018
   
December 31, 2017
 
Prepaid expenses
 
$
3
   
$
1
 
Total
 
$
3
   
$
1
 

As of December 31, 2018, and 2017, the Company’s prepaid expense corresponds to rent advances.

7. TRADE PAYABLES AND ACCRUED LIABILITIES
   
December 31, 2018
   
December 31, 2017
 
Trade payables and accrued liabilities
 
$
14
   
$
8
 
Total
 
$
14
   
$
8
 

As of December 31, 2018, and 2017, the Company’s trade payables and accrued liabilities corresponds to taxes payable, and loan payable to Oscar Franco, a director of the Company, for fiscal 2016 and 2017 rent.
F-19


COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
8. CAPITAL STOCK
a.
Authorized

Unlimited number of common shares, without par value

b.
Common shares issued

   
December 31, 2018
   
December 31, 2017
 
Share capital
 
$
1,764
   
$
1,764
 
Total
 
$
1,764
   
$
1,764
 

As of December 31, 2018, and 2017, the Company’s share capital consists of 5,000 common shares at a value of $1,764.

9. INCOME TAX
   
December 31, 2018
   
December 31, 2017
 
Income tax
   
4
     
7
 
Total
 
$
4
   
$
7
 

The 2017 and 2018 income tax provision was calculated by presumptive income.

The tax provisions applicable to the Company establish a general rate of 34% for the year 2017, for the year 2018 onwards of 33%, and a surcharge for taxable bases greater than $ 800,000 between 0 and 6%, the year 2018 will be between 0 and 4%.

The basis for determining the income tax cannot be less than 3.5% of your liquid assets on the last day of the immediately preceding taxable year (presumptive income).  In accordance with article 165 of Law 1607 of 2012 and Regulatory Decree 2548 of 2014, for tax purposes, the remissions contained in the tax rules to the accounting standards will continue in force during the four (4) years following the entry into force of the International Financial Reporting Standards.  The Law and Regulatory Decree were repealed according to article 22 of Law 1819 of 2016, which added a new article to the National Tax Statute, which provides the following for the validity of 2017 and subsequent: “for the determination of the tax on Income and complementary, in the value of assets, liabilities, equity, income, costs and expenses, the taxpayers obliged to keep accounting will apply the recognition and measurement systems, in accordance with the regulatory technical frameworks in force in Colombia, when the tax law expressly refers to them and in cases where this does not regulate the matter. In any case, the tax law may expressly provide a different treatment, in accordance with article 4 of law 1314 of 2009”.

The general term of the income statements from 2016 onwards is three (3) years. For entities subject to transfer prices the term will be six (6) years, this term also applies in the case of declarations in which tax losses are compensate. The statements that generate tax losses, the term will be twelve (12) years; however, if the taxpayer compensates the loss in the last two (2) years to do so, the term  will be extend for three (3) more years from said compensation in relation to the statement in which it was settled such loss.

The following is a detail of the reconciliation between the accounting profit and the liquid income, as well as the determination of the income tax and the surcharge recognized for the period.

Financing Law

On December 29, 2018, Law 1943 (called the financing law) was promulgated, introducing important reforms to the tax code in Colombia, the most relevant issues about this law are summarized below:

1.
The list of goods and services excluded from VAT established in articles 424, 426 and 476 of the Tax Code was modified.
2.
Article 437 of the Tax Code was added, regarding guidelines on the fulfillment of formal duties on VAT by service providers from abroad.
3.
The withholding of VAT may be up to 50% of the value of the tax, subject to regulation of the National Government. Withholding tax must be made at VAT when personal property or encumbered services are acquired from persons registered as contributors to Simple regime.
4.
The VAT rate remains at 19%.
F-20


COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 
9. INCOME TAX (continued)
  Financing Law (continued)

5.
The simplified VAT regime is eliminated, classifying taxpayers as not responsible as long as they meet the same criteria as they were for the simplified one (in addition to not belonging to the simple regime).
6.
The tax discount on income is created in the sales tax on the acquisition or formation of real productive fixed assets (eliminating the special deduction of VAT on the acquisition of capital goods).
7.
For the years 2019, 2020, 2021, an extraordinary estate tax is created by: i) natural persons and illiquid successions contributing to income tax, ii) national or foreign natural persons who do not have residence in the country , with respect to the assets directly owned in the country, ii) national or foreign natural persons who do not have residence in the country, with respect to their assets indirectly owned through permanent establishments in the country (except for exceptions in international treaties and in domestic law ), iv) illiquid successions of causes without residence in the country at the time of their death with respect to their assets owned in the country; and v) foreign companies or entities not declaring income tax, with respect to their property owned in Colombia, such properties, yachts, boats, boats, works of art, aircraft or mining or oil rights. This lien will not apply to stocks or accounts receivable. The lien will apply to the possession as of January 1, 2019 of a net worth of more than 5,000 million pesos (1% rate each year).
8.
Creation of the tax normalization tax at a rate of 13% for taxpayers of income tax who have omitted assets or non-existent liabilities as of January 1, 2019.
9.
As of 2019, a withholding at the source of the income tax of 7.5% on the profits that would have been able to be distributed to national companies as non-constitutive income or occasional income is added. The component taxed on profits distributed via dividends will be taxed at the rate indicated in article 240 of the Tax Statute, in which case the withholding at the source indicated above will be applied once this tax has been reduced. This withholding does not apply to taxpayers who are part of a business group or who belong to the holding regime.
10.
The income tax rate on dividends received by companies or other foreign entities without domicile in the country, by natural persons without residence in Colombia and by illiquid successions of causes that were not residents in Colombia was increased to 7.5% (profits) of 2017 and 2018 were taxed at 5%). The component taxed on profits distributed via dividends will be taxed at the rate indicated in article 240 of the Tax Statute, in which case the tax indicated above will be applied once this tax has been reduced.
11.
A transition regime is created with regard to changes made to dividends.
12.
Increases the maximum marginal rate applicable to resident natural persons and modal assignments to 39%. Likewise, certain percentages applicable to withholding at source to natural persons are modified.
13.
Life insurance indemnities will be taxed at the rate applicable to occasional earnings from the taxable year 2019 if they exceed 12,000 UVT.
14.
The income tax rate applicable to national (and similar) or foreign companies (with or without residence in Colombia required to file annual income tax returns) and permanent establishments of foreign entities will be 33% for the taxable year 2019, 32% by 2020, 31% by 2021, and 30% from 2022. Special rules will apply to the hotel sector as of January 1, 2019
15.
Financial institutions must settle additional point to income tax and complementary when the taxable income is equal to or greater than 120,000 UVTs as follows: (i) 4% by 2019; and (ii) 3% by 2020 and 2021.
16.
In the income tax there are modifications around: i) income that is not considered to be of national source; ii) deduction of all taxes paid (exception to estate tax and standardization tax) and inclusion of some taxes paid as a tax discount (50% - industry and commerce tax); iii) reduction of the presumptive income rate gradually up to 0% from the taxable year 2021 iv) discounts for taxes paid abroad, v) modification of the exempt income contained in article 235-2 of the Tax Statute ; vi) elimination of tax discounts; and vii) the rules applicable to private equity funds, collective investment funds, among others.
17.
Modifies the provision contained in article 90 of the Tax Statute and the allocation of commercial margins will be extensible to the provision of services. It is understood that the value assigned by the parties differs markedly from the average when it is separated by more than fifteen percent (15%) of the prices established in commerce for goods or services of the same species and quality. It is also provided that the sale value of the shares cannot be less than 130% of the intrinsic value, leaving the possibility for the DIAN to use technical methods to determine the sale price.
18.
The sub-capitalization rule is modified by stating that it only applies when debts that generate interest are incurred, directly or indirectly, in favor of economic or domestic affiliates (before it did not matter), only interest generated on occasion may be deducted of such debts as the average total amount thereof, does not exceed the result of multiplying by two (2) the taxpayer's liquid assets determined as of December 31 of the immediately preceding taxable year.
19.
The profits obtained in the transfer of assets or companies located in the national territory are taxed, through the transfer of shares, participations or rights of foreign entities, if the transfer was made directly with the underlying asset (indirect disposals).
20.
Permanent establishments of foreign companies will be taxed with income tax with respect to their income from national and foreign sources that are attributable to them.
F-21


COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
9. INCOME TAX (continued)
  Financing Law (continued)
21.
Employee education contributions not considered as indirect payments to the worker are included as a deductible expense.
22.
It also indicates that interest and other financial costs attributed to a permanent establishment in Colombia may be deductible provided they have not been subject to withholding at source.
23.
Article 885 of the Tax Statute regarding the presumption of full right for foreign controlled entities is amended, indicating that if more than 80% of income is active there will be no passive income.
24.
Article 793 of the Tax Statute is added, including events under which there is joint and several liability with the principal taxpayer in paying the tax.
25.
A special regime called mega investments is created as of January 1, 2019 for 20 years, for income taxpayers who generate at least 250 direct jobs and make new investments within the national territory with a value equal to or greater than 30,000. 000 UVT (COP $ 1,028,100,000,000 in the year 2019) in any commercial, industrial and / or service activity.
26.
Benefits are raised for the mega-investment regime in: i) the income tax rate (27%), ii) asset depreciation, iii) presumptive income exclusion, iv) non-application of dividend tax; and v) not subject to the estate tax.
27.
The regime for Colombian holding companies is added to income and complementary taxes. It emphasizes in national societies that have as one of their main activities the holding of securities, investment in shares or participations abroad. This regime allows an exemption on dividends received by foreign entities.
28.
Guidelines are generated around works for taxes clarifying validity, conditions for maintaining the means of payment, among others.
29.
Some retention rates at the source are modified for payments abroad: i) for administration services it will be 33% and in the case of technical assistance, exploitation of industrial property, technical services, consulting, software licensing (among others) will be 20%.
30.
In the matter of procedure there are modifications: i) withholding statements at the source that despite being ineffective will be an executive title, ii) electronic notification of administrative acts; and iii) payment of glosses in the statement of objections to avoid default interest and use the flows plus two points; iv) elimination of extension of firmness to three (3) additional years for compensation of tax losses; v) inclusion of terminations by mutual agreement and conciliations, among others.

10. RELATED PARTY DISCLOSURES
The directors and officers owe the Company $1,539 as at December 31, 2018 ($1,676 – December 31, 2017).
11. COMMITMENTS AND CONTINGENCIES

Management contracts

The Company currently does not have management contracts. These contracts require payments of approximately $Nil to be made upon the occurrence of a change in control to the officers of the Company. The Company is also committed to payments upon termination of approximately $Nil pursuant to the terms of these contracts. As a triggering event has not taken place, these amounts have not been recorded in these financial statements.

Lease commitment

Pursuant to a lease agreement dated May 2, 2018, between C.I. Gramaluz S.C.A. and Cosechemos, Cosechemos has leased the Cosechemos farm, which is a 361 hectares property in Girón, Santander, Colombia.  The monthly rent is fixed at approximately $3,480 (COP12,000,000) for 6 years starting on May 2, 2018.

On September 1, 20019, an amendment with a grace period of 16 months formalized with respect to the initial subscription date, with new terms established for the leases and an option to purchase the property to CI Gramaluz SCA was signed and the lease contract was revised. Monthly rent was waived from May 2, 2018 to August 31, 2019. Effective September 1, 2019, Cosechemos shall pay approximately $2,900 (COP10,000,000) a month. On March 1, 2020, the monthly fee shall be increased to approximately $5,800 (COP20,000,000).  This contract maturity is 5 years. Cosechemos has an option to purchase the Cosechemos Farm, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia. As of January 1, 2019, the lease will be accounted under IFRS 16 and the Company will recognize a right-of-use asset of $315,531, a current lease liability of $5,374 and non-current lease liability of $310,157.
F-22

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 
11. COMMITMENTS AND CONTINGENCIES (continued)

Pursuant to an (i) option dated December 27, 2018 to enter in a lease  agreement between Waldshut C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm I, and (ii) option to lease agreement dated December 27, 2018 between Vicalvaro C.V. and Cosechemos, Cosechemos the option to lease the Palagua Farm II. The Palagua Farm I is a 700 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm II is a 1,432 hectares property in Palagua, Boyacá, Colombia. The Palagua Farm I and Palagua Farm II (collectively, the “Palagua Farms”) are contiguous to each other. The Palagua Farms are approximately 300 kilometers from the Cosechemos Farm.   There is not any expiration date for this option.

Pursuant to the option to lease agreements for the Palagua Farms, Cosechemos shall pay approximately $28.13 (COP$95,879) a month for each hectare of the Palagua Farms being used to cultivate cannabis by Cosechemos. Cosechemos is not required to make any payments until it commences its operations at the Palagua Farms.  Cosechemos has a right to purchase the Palagua Farms, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.

Contingencies

Cannabis operations are subject to extensive controls and regulations imposed by various levels of government that may be amended from time to time. The Company’s operations may require licenses and permits from various governmental authorities in the countries in which it plans to operate. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out growth and development of its projects.

Although the Company has taken steps to verify title to the properties on which it will conduct its cannabis development and in which it has an interest, in accordance with industry standards for the current stage of operations of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, social licensing requirements, unregistered prior agreements, unregistered claims, and non-compliance with regulatory and environmental requirements. The Company’s assets may also be subject to increases in taxes and royalties, renegotiation of contracts, political uncertainty and currency exchange fluctuations and restrictions.

Environmental

The Company’s growth and development activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair value

The Company’s financial instruments measured at amortized cost as at December 31, 2018 and 2017, consist of amounts receivable, trade payables and accrued liabilities, and the amounts reflected in the statements of financial position approximate fair value due to the short term maturity of these instruments.

Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fair value based on:

Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; and
Level 3 - inputs for the instruments are not based on any observable market data.

The Company had no financial instruments recorded at fair value in the statement of financial position at December 31, 2018 and 2017.

Fair value estimates are made at the relevant transaction date, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties in significant matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

F-23


COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 
12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
Risk management overview

The Company has exposure to credit, liquidity and market risks from its use of financial instruments. This note provides information about the Company’s exposure to each of these risks, the Company’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these financial statements.

Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s amounts receivables.

The carrying amount of amounts receivable represents the maximum credit exposure. As at December 31, 2018, the Company’s total receivable was $1,539 ($1,676 – December 31, 2017).

Market risk

Market risk is the risk that changes in market conditions, such as commodity prices, foreign exchange rates, and interest rates, will affect the Company’s net income or the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing the Company’s returns.

(i)
Commodity price risk
Commodity price risk is the risk that future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for cannabis seeds and plants are impacted by not only the relationship between the Colombian peso, Canadian and United States dollar, as outlined below, but also global economic events that dictate the levels of supply and demand. Lower commodity prices can also reduce the Company’s ability to raise capital. As the Company is not generating revenues, commodity price risk does not directly impact the Company’s financial results.

(ii)
Foreign exchange risk
Foreign currency exchange rate risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in foreign exchange rates.

As at December 31, 2018 and 2017, the Company had no liabilities denominated in foreign currencies, they are presented in United States dollars:

(iii)
Interest exchange risk
             The Company has no cash balance as at December 31, 2018 and 2017.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with the financial liabilities. The Company’s financial liabilities consist of trade payables and accrued liabilities of $14 as at December 31, 2018 ($8 – December 31, 2017). The Company has no cash as at December 31, 2018 and 2017.

Trade payables and accrued liabilities consist of invoices payable to trade suppliers for administration and professional expenditures. The Company processes invoices within a normal payment period. Trade payables have contractual maturities of less than 90 days.

Price risk

The Company is exposed to price risk with respect to commodity prices. Commodity prices fluctuate on a daily basis and are affected by numerous factors beyond the Company’s control. The supply and demand for commodities, the level of interest rates, the rate of inflation, investment decisions by large holders of commodities including governmental reserves and stability of exchange rates can all cause significant fluctuations in commodities prices. Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems and political developments.
F-24

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 
12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
Sensitivity analysis

The Company has, for accounting purposes, designated its amounts receivable as loans and receivables which are measured at amortized cost. Trade payables and accrued liabilities are classified for accounting purposes as other financial liabilities, which are measured at amortized cost. As of December 31, 2018 and 2017, both the carrying and fair value amounts of the Company's financial instruments are approximately equivalent due to the short-term maturity of these instruments.

The sensitivity analysis shown in the notes below may differ materially from actual results. Based on management's knowledge of and experience with the financial markets, the Company believes the following movements are "reasonably possible":

Trade payables and accrued liabilities denominated in Canadian and United States dollars are subject to foreign currency risk. As at December 31, 2018, had the United States dollar weakened/strengthened by 5% against the Canadian dollar with all other variables held constant, there would have been a change of approximately $Nil in the Company’s net loss.

13. CAPITAL MANAGEMENT
The Company will consider the aggregate of its common shares and deficit as capital. The Company’s objective, when managing capital, is to ensure sufficient resources are available to meet day to day operating requirements and to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

At December 31, 2018 and 2017, the Company has no cash-generating operations; therefore, the only source of cash flow is generated from financing activities or loans. The Company’s officers and senior management are in the process of searching for additional business opportunities. Potential business activities are appropriately evaluated by senior management and a formal review and approval process has been established at the Board of Directors’ level. The Company may enter into new financing arrangements to meet its objectives for managing capital, until such time as a viable business activity is operational and the Company can thereby internally generate sufficient capital to cover its operational requirements.

The Company’s officers and senior management take full responsibility for managing the Company’s capital and do so through quarterly meetings and regular review of financial information. The Company’s Board of Directors is responsible for overseeing this process.

14. SUBSEQUENT EVENTS
On July 16, 2019, the Company signed a share purchase agreement with Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa, collectively, the “Vendors”, to purchase 90% of Cosechemos S.A.S Ya (“Cosechemos”). Pursuant to the share purchase agreement, Flora acquired 4,500 shares of Cosechemos. As consideration for the Cosechemos shares, Flora (i) pay $80,000 to the Vendors, and (ii) grant the Vendors a 10% non-dilutive, free carried interest in Cosechemos, the (“Free Carry”). Pursuant to the agreement, Flora is required to pay the Vendors, as a one-time payment, $750,000 within 60 days of Cosechemos earning a net income of $10,000,000. To date, payments under this agreement has not been made.

The Free Carry will terminate upon Flora investing an aggregate of $25,000,000 into the Company.

The Company received loans from Flora in the amount of $212,380 in August 2019.
OFFERING

Flora is offering up to 40,000,000 (the “Maximum Offering”) units (the “Units”) of the Company to be sold in the offering (the “Offering”). Each Unit is comprised of one common share in the capital of the Company, with no par value per share (a “Common Share”), and one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”) to purchase one additional Common Share (a “Warrant Share”) at an exercise price of $1.00 per Warrant Share, subject to certain adjustments, over an 18-month exercise period following the date of issuance of the Warrant. The Units are being offered at a purchase price of $0.75 per Unit. Flora is selling the Units through a Tier 2 offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933. There is no assurance the Maximum Offering will be completed.

F-25

COSECHEMOS YA S.A.S.
Notes to the financial statements
For the year ended December 31, 2018 and 2017
(expressed in United States dollars)
 
14. SUBSEQUENT EVENTS (continued)
LEASE AGREEMENT

Pursuant to a lease agreement dated May 2, 2018, between C.I. Gramaluz S.C.A. and Cosechemos, Cosechemos has leased the Cosechemos farm, which is a 361 hectares property in Girón, Santander, Colombia.  The monthly rent is fixed at approximately $3,480 (COP12,000,000) for 6 years starting on May 2, 2018.

On September 1, 20019, an amendment with a grace period of 16 months formalized with respect to the initial subscription date, with new terms established for the leases and an option to purchase the property to CI Gramaluz SCA was signed and the lease contract was revised. Monthly rent was waived from May 2, 2018 to August 31, 2019. Effective September 1, 2019, Cosechemos shall pay approximately $2,900 (COP10,000,000) a month. On March 1, 2020, the monthly fee shall be increased to approximately $5,800 (COP20,000,000).  This contract maturity is 5 years. Cosechemos has an option to purchase the Cosechemos Farm, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia. As of January 1, 2019, the lease will be accounted under IFRS 16 and the Company will recognize a right-of-use asset of $315,531, a current lease liability of $5,374 and non-current lease liability of $310,157.

Pursuant to an (i) option dated December 27, 2018 to enter in a lease  agreement between Waldshut C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm I, and (ii) option to lease agreement dated December 27, 2018 between Vicalvaro C.V. and Cosechemos, Cosechemos the option to lease the Palagua Farm II. The Palagua Farm I is a 700 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm II is a 1,432 hectares property in Palagua, Boyacá, Colombia. The Palagua Farm I and Palagua Farm II (collectively, the “Palagua Farms”) are contiguous to each other. The Palagua Farms are approximately 300 kilometers from the Cosechemos Farm.   There is not any expiration date for this option.

Pursuant to the option to lease agreements for the Palagua Farms, Cosechemos shall pay approximately $28.13 (COP$95,879) a month for each hectare of the Palagua Farms being used to cultivate cannabis by Cosechemos. Cosechemos is not required to make any payments until it commences its operations at the Palagua Farms.  Cosechemos has a right to purchase the Palagua Farms, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.

F-26


COSECHEMOS YA S.A.S.




CONDENSED INTERIM FINANCIAL STATEMENTS

For the three and six months ended June 30, 2019 and 2018
(Unaudited)

(Expressed in United States Dollars)









F-27

COSECHEMOS YA S.A.S.
       
Condensed Interim Statements of Financial Position
     
(Expressed in United States dollars)
(Unaudited)
           

 
           
As at:
 
June 30,
2019
   
December 31, 2018
 
 
           
ASSETS
           
Current
           
Amounts receivable (Note 5)
 
$
1,575
   
$
1,539
 
Prepaid expenses (Note 6)
   
3
     
3
 
Biological asset (Note 7)
   
11,096
     
-
 
Total current assets
   
12,674
     
1,542
 
Non-current
               
        Right-of-use asset (Note 8)
   
315,531
     
-
 
        Intangible asset (Note 9)
   
1,048
     
-
 
Total assets
 
$
329,253
   
$
1,542
 
 
               
LIABILITIES
               
Current
               
Trade payables and accrued liabilities (Note 10)
 
$
15,027
   
$
14
 
Current lease liability (Note 11)
   
5,374
     
-
 
Total current liabilities
   
20,401
     
14
 
Non-current lease liability (Note 11)
   
310,157
     
-
 
Total liabilities
   
330,558
     
14
 
SHAREHOLDERS’ EQUITY
               
      Share capital (Note 12)
   
1,764
     
1,764
 
      Accumulated deficit
   
(3,005
)
   
(11
)
      Accumulated other comprehensive income
   
(64
)
   
(225
)
Total shareholders' equity
   
(1,305
)
   
1,528
 
Total liabilities and shareholders’ equity
 
$
329,253
   
$
1,542
 
 
               
Nature and continuance of operations (Note 1)
Commitments and contingencies (Note 14)
Subsequent events (Note 15)


APPROVED BY

Signed  “Oscar Mauricio Franco Ulloa”, Legal representative

Signed  “Ernesto Erazo Cardona”, Certified Public Accountant, T.P 108159 – T, representing Mazars Colombia SAS
See accompanying notes to the financial statements
F-28


COSECHEMOS YA S.A.S.
Condensed Interim Statements of Loss and Comprehensive Loss
 
(Expressed in United States dollars)
(Unaudited)
                       
 
                 
   
For the three months ended
   
For the three months ended
   
For the six months ended
   
For the six months ended
 
 
 
June 30, 2019
   
June 30, 2018
   
June 30, 2019
   
June 30, 2018
 
 
                       
Expenses
                       
General administration expenses
 
$
1,295
   
$
-
   
$
1,295
   
$
-
 
Travel
   
779
     
-
     
779
     
-
 
Amortization (Notes 9)
   
28
     
-
     
28
     
-
 
Income tax expense
   
577
     
-
     
577
     
-
 
Interest expense (Note 10)
   
315
     
-
     
315
     
-
 
Net loss for the period
 
$
2,994
   
$
-
   
$
2,994
   
$
-
 
Other comprehensive loss
                               
Foreign currency translation
   
(161
)
   
-
     
(161
)
   
-
 
 
Comprehensive loss for the period
 
$
2,833
   
$
-
   
$
2,833
   
$
-
 
 
                               
Basic and diluted loss per share
 
$
0.57
   
$
0.00
   
$
0.57
   
$
0.00
 
Weighted average number of common shares outstanding – basic and diluted
   
5,000
     
5,000
     
5,000
     
5,000
 





See accompanying notes to the financial statements

F-29

COSECHEMOS YA S.A.S.
                         
Condensed Interim Statements of Shareholders' Equity
 
(Expressed in United States dollars)
(Unaudited)
                             
                               
 
                             
 
 
Share Capital
   
Accumulated Deficit
   
Accumulated Other Comprehensive Income
   
Shareholders’ Equity
 
     
#
   

$
   

$
   

$
   

$
 
 Balance, December 31, 2018
   
5,000
     
1,764
     
(11
)
   
(225
)
   
1,528
 
                                         
 Other comprehensive loss for the period
   
-
     
-
     
-
     
161
     
161
 
 Loss for the period
   
-
     
-
     
(2,994
)
   
-
     
(2,994
)
                                         
 Balance, June 30, 2019
   
5,000
     
1,764
     
(3,005
)
   
(64
)
   
(1,305
)
                                         
Balance, December 31, 2017
   
5,000
     
1,764
     
(7
)
   
(88
)
   
1,669
 
                                         
 Loss for the period
   
-
     
-
     
-
     
-
     
-
 
                                         
 Balance, June 30, 2018
   
5,000
     
1,764
     
(7
)
   
(88
)
   
1,669
 


See accompanying notes to the financial statements



F-30


             
COSECHEMOS YA S.A.S
           
Condensed Interim Statements of Cash Flows
(Expressed in United States dollars)
(Unaudited)
           
   
June 30, 2019
   
June 30, 2018
 
CASH FROM OPERATING ACTIVITIES:
           
Net loss for the period
 
$
(2,833
)
 
$
-
 
Accrued interest on amounts payables (Note 10)
   
315
     
-
 
Amortization (Notes 9)
   
28
     
-
 
     
(2,490
)
   
-
 
Net change in non-cash working capital
   
2,490
     
-
 
Net cash flows from operating activities
   
-
     
-
 
                 
CHANGE IN CASH DURING THE PERIOD
   
-
     
-
 
                 
CASH, beginning of the year
   
-
     
-
 
                 
CASH, end of the period
 
$
-
   
$
-
 
                 



See accompanying notes to the financial statements

F-31


COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)

1. NATURE AND CONTINUANCE OF OPERATIONS
Cosechemos YA SAS (the “Company” or “Cosechemos”), was established on May 12, 2016, according to private document of single shareholder No. 05-346798-16;  whose corporate purpose is to carry out research to develop services and products for the agricultural sector of the country or abroad as well as promote and implement projects related to the agricultural sector, develop and exploit activities related to the agricultural sector, developing technology for the Colombian field, and export, import, market wholesale or retail all kinds of goods and services developed in the agricultural sector. The Company’s head office is located at Transversal 154 # 150 - 221 Office 304, Floridablanca, Santander, Colombia.

Going concern

The Company is in the preliminary stages of its planned operations and has not yet determined whether its processes and business plans are economically viable. The continued operations of the Company are dependent upon the ability of the Company to obtain sufficient financing to complete the development of its facilities and if they are proven successful, the existence of future profitable production, or alternatively, upon the Company’s ability to dispose of its assets on an advantageous basis, all of which are uncertain.

These condensed interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company will need to raise additional capital in the near term to fund its ongoing operations and business activities. While the Company has entered into a share purchase agreement with Flora Growth Corp. (“Flora”), and Flora advanced loans and has engaged in an offering of units (see Note 15), there is no assurance that this financing will conclude. There is also no assurance that other financings will be available on terms acceptable to the Company or at all. As a result of these circumstances, there are material uncertainties that cast significant doubt as to the appropriateness of the going concern presumption.

The business of cannabis growth and development of Cannabidiol (“CBD”) oils involves a high degree of risk and there can be no assurance that current business development programs will result in profitable cannabis operations. The Company’s continued existence is dependent upon the acquisition of assets, preservation of its interest in the underlying assets, acquisition of various licenses, the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary, or alternatively upon the Company’s ability to dispose of its assets and operations on an advantageous basis.

These condensed interim financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and classifications in the condensed interim statement of financial position that may be necessary were the Company unable to continue as a going concern and these adjustments could be material.

2. BASIS OF PRESENTATION
The following is a summary of significant accounting policies used in the preparation of these financial statements.
Statement of compliance

These financial statements of the Company were prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The accompanying interim financial statements have been prepared by management in conformity with IAS 34, Interim Financial Reporting and do not include all the disclosures required in full annual financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These interim financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2018.

Basis of presentation

The condensed interim financial statements of the Company have been prepared on an accrual basis, except for cash flow information and are based on historical cost basis, except for certain financial instruments which are stated at their fair values. The condensed interim financial statements are presented in United States dollars unless otherwise noted. These financial statements were approved and authorized by the Board of Directors of the Company on September 26, 2019.
F-32


COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)
3. SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed interim financial statements were prepared using the same accounting policies and methods as those used in the Company’s financial statements for the year ended December 31, 2018. These new standards and changes did not have any material impact on the Company’s financial statements.

Biological assets and inventory

The Company measures biological assets consisting of cannabis plants, at fair value less costs to sell up to the point of harvest. Costs incurred to transform biological assets to the point of harvest ("production costs") are capitalized as they are incurred, which become the cost basis of the biological assets. While the Company's biological assets are within the scope of IAS 41 Agriculture, the Company applies a similar approach to IAS 2 Inventories in capitalizing direct and indirect costs of biological assets. These costs include direct costs such as nutrients, soil, seeds, and direct labour, as well as other indirect costs such as utilities, an allocation of indirect labour, property taxes, and depreciation of equipment used in the growing process. The biological assets are then revalued to fair value less costs to sell at the end of the period. Gains or losses arising from changes in fair value less costs to sell are included under fair value adjustments within the consolidated statement of operations and comprehensive income (loss).

Inventories of finished goods and work-in-process are valued at the lower of cost and net realizable value. Inventories of harvested cannabis are transferred from biological assets at their fair value at the point of harvest, which becomes the initial deemed cost. Any subsequent post-harvest costs ("processing costs"), including direct costs attributable to processing and related overhead, are capitalized to inventory as they are incurred, to the extent that cost is less than net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated variable costs to sell. Inventories of raw materials, supplies and consumables are valued at the lower of cost and net realizable value, with cost determined using the weighted average cost basis.

Upon the sale of inventory, the capitalized production costs and processing costs are recorded in cost of sales before fair value adjustments in the statement of loss and comprehensive loss. The related realized fair value adjustments on inventory sold in the year is recorded separately in statement of loss and comprehensive loss.

Intangible asset

Intangible assets are recorded at cost less accumulated amortization and any impairment losses. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization of definite life intangibles are calculated on a straight-line basis over their estimated useful lives, which do not exceed the contractual period.

The estimated useful lives, residual values and amortization methods are reviewed annually and any changes in estimates are accounted for prospectively. Intangible assets with an indefinite life or not yet available for use are not subject to amortization. The license for cannabis production has an estimated useful life of 5 years.

Impairment of intangible asset

Impairment of an intangible asset is tested on a quarterly basis. Impairment loss is recognized for the amount by which the carrying amount of the intangible asset exceeds it recoverable amount. The recoverable amount of the intangible asset has been determined based on a fair value less costs of disposal. There is a material degree of uncertainty with respect to the estimates of the recoverable amounts of the intangible asset given the necessity of making key economic assumptions about its future. Any impairment is recorded in profit and loss in the period in which the impairment is identified. A reversal of an intangible asset impairment loss is allocated to the intangible asset on a pro rata basis. In allocating a reversal of an impairment loss, the carrying amount of an intangible asset shall not be increased above the lower of its recoverable amount and the carrying amount that would have been determined had no impairment loss been recognized for the intangible asset in a prior period.

F-33



COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases

IFRS 16, Leases (“IFRS 16”) was issued in January 2016. It replaces the previous leases Standard, IAS 17 Leases, and related Interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. It eliminates the current dual accounting model for leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with lessor accounting substantially unchanged from IAS 17. Effective January 1, 2019, the Company adopted this standard using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS17.

For contracts entered into before January 1, 2019, the Company determined whether the arrangement contained a lease under IAS 17 Leases ("IAS 17") and its interpretive guidance. Prior to the adoption of IFRS 16, these leases were classified as operating or finance leases based on an assessment of whether the lease transferred significantly all the risks and rewards of ownership of the underlying asset.

Upon transition to IFRS 16, lease liabilities were measured at the present value of the remaining lease payments discounted by the Company's incremental borrowing rate as at January 1, 2019. Right-of-use assets and lease liabilities were recognized on the statement of financial position with the cumulative difference recognized in retained earnings. At transition, the Company had lease liabilities of $315,531 and right-of-use asset of $315,531 and were recognized in the statement of financial position.

For contracts entered into subsequent to January 1, 2019, at inception of the contract, the Company assesses whether a contract is, or contains, a lease by evaluating if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.  To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

The contract involves the use of an identified asset. This may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
The Company has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and
The Company has the right to direct the use of the asset. The Company has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
o
The Company as the right to operate the asset; or
o
The Company designed the asset in a way that predetermines how and for what purpose it will be used.

For contracts that contain a lease, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date.  The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted by any initial direct costs, and costs to dismantle and remove the underlying asset less any lease incentives.  The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the underlying asset or the end of the lease term. The estimated useful lives of right-to-use assets are determined on the same basis as those of IAS 16, property, plant and equipment. Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets. This replaced the previous requirement to recognize a provision for onerous lease contacts.

The lease liability is initially measured at the present value of lease payments to be paid subsequent to the commencement date of the lease, discounted either at the interest rate implicit in the lease or the Company's incremental borrowing rate.  The lease payments measured in the initial lease liability include payments for an optional renewal period, if any, if the Company is reasonably certain that it will exercise a renewal extension option.  The liability is measured at amortized cost using the effective interest method and will be remeasured when there is a change in either the future lease payments or assessment of whether an extension or other option will be exercised. The lease liability is subsequently adjusted for lease payments and interest on the obligation.  Interest expense on the lease obligation is included in the statement of loss.

The Company has elected not to recognize right-of-use assets and lease liabilities for leases with a lease term of less than 12 months and low value assets and recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term, as permitted by IFRS 16. As at June 30, 2019, the Company has no such leases.
F-34

COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting pronouncements not yet adopted

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for accounting periods beginning on or after January 1, 2019 or later periods. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics.  The revised definition focuses on the idea that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.  The amendments are effective for annual reporting periods beginning on or after January 1, 2020.  Earlier adoption is permitted.

IFRS 3 – Business Combinations (“IFRS 3”) was amended in October 2018 to clarify the definition of a business.  This amended definition states that a business must include inputs and a process and clarified that the process must be substantive and the inputs and process must together significantly contribute to operating outputs.  In addition it narrows the definitions of a business by focusing the definition of outputs on goods and services provided to customers and other income from ordinary activities, rather than on providing dividends or other economic benefits directly to investors or lowering costs and added a test that makes it easier to conclude that a company has acquired a group of assets, rather than a business, if the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets.  The amendments are effective for annual reporting periods beginning on or after January 1, 2020.  Earlier adoption is permitted.

For acquisitions that do not meet the definition of a business under IFRS 3, the Company follows International Accounting Standard (“IAS”) 37 and IAS 38 guidelines for asset acquisition, where the consideration paid is allocated to assets acquired based on fair values on the acquisition date and transactions costs are capitalized and allocated to the assets acquired.

4. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTIES
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results could differ from those estimates and these estimates could be material.

The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to:

Biological assets and inventory

Biological assets, consisting of cannabis plants, are measured at fair value less costs to sell. At the point of harvest, the biological assets are transferred to inventory at fair value less costs to sell. As a result, critical estimates related to the valuation of biological assets are also applicable to inventory. Determining the fair value less costs to sell requires the Company to make assumptions about the expected harvest yield from the cannabis plants, the value associated with each stage of the plants' growth cycle, estimated selling price, processing costs to convert harvested cannabis into finished goods, selling costs, the equivalency factor to convert dry cannabis into cannabis oil and the multiples of crude extract and isolate mass in diluted cannabis oil. The Company's estimates are, by their nature, subject to change.

Inventory is valued at the lower of cost and net realizable value. Determining the net realizable value requires the Company to make assumptions about the estimated selling price in the ordinary course of business, the estimated costs of completion and the estimated variable costs to sell.

Long-lived assets are defined as property, plant and equipment and intangible assets with finite lives. Depreciation and amortization are dependent upon estimates of useful lives and impairment is dependent upon estimates of recoverable amounts. These are determined through the exercise of judgment, and are dependent upon estimates that take into account factors such as economic and market conditions, frequency of use, anticipated changes in laws, and technological improvements.

F-35


COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)

5. AMOUNTS RECEIVABLE
   
June 30, 2019
   
December 31, 2018
 
Amounts receivable
 
$
1,575
   
$
1,539
 
Total
 
$
1,575
   
$
1,539
 

As of June 30, 2019, the Company’s amounts receivable was $1,575. This corresponds to amounts receivable from founders since the incorporation of the Company (December 31, 2018 - $1,539).

6. PREPAID EXPENSES
   
June 30, 2019
   
December 31, 2018
 
Prepaid expenses
 
$
3
   
$
3
 
Total
 
$
3
   
$
3
 

As of June 30, 2019, the Company’s prepaid expense corresponds to rent advances (December 31, 2018 - $3).

7. BIOLOGICAL ASSET
   
June 30, 2019
   
December 31, 2018
 
Biological asset
 
$
11,096
   
$
-
 
Total
 
$
11,096
   
$
-
 

As of June 30, 2019, biological asset corresponds to infrastructure and equipment for the preparation of the first harvest.

8. RIGHT-OF-USE ASSET
Cost
     
Balance, December 31, 2018
 
$
-
 
Adoption of IFRS 16
   
315,531
 
Balance, June 30, 2019
 
$
315,531
 
         
Amortization
       
Balance, December 31, 2018
 
$
-
 
Amortization for the period
   
-
 
Balance, June 30, 2019
 
$
-
 
Net book value:
       
At December 31, 2018
 
$
-
 
At June 30, 2019
 
$
315,531
 

On May 2, 2018, the Company entered into a lease agreement for the Cosechemos farm, which is a 361 hectare property in Giron, Santander, Colombia. It has a right-of-use asset of $315,531 at June 30, 2019.

9. INTANGIBLE ASSET
   
June 30, 2019
   
December 31, 2018
 
License
 
$
1,048
   
$
-
 
Total
 
$
1,048
   
$
-
 

On May 14, 2019, the Company received certification from the Colombian Agriculture Institute to be a registered producer of Cannabis products. The Company purchased the license for $1,076 and is amortized over 5 years.
F-36


COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)

10. TRADE PAYABLES AND ACCRUED LIABILITIES
   
June 30, 2019
   
December 31, 2018
 
Trade payables and accrued liabilities
 
$
15,027
   
$
14
 
Total
 
$
15,027
   
$
14
 

As of June 30, 2019, the Company’s trade payables and accrued liabilities corresponds to amounts payable to vendors including interest and withholding tax. It also includes taxes payable, and loan payable to Oscar Franco for fiscal 2016 and 2017 income tax as well as all payables owing to him for the purchase of materials for the harvest (December 31, 2018 - $14).

11. LEASE LIABILITY
On May 2, 2018, the Company entered into a lease agreement for the Cosechemos farm, which is a 361 hectare property in Giron, Santander, Colombia. The monthly rent payable under the terms of the lease is $2,900 (10,000,000 Colombian pesos). There is a rent free period from May 2018 to August 2019. Rent payment will commence on September 1, 2019 and will increase to $5,800 (20,000,000 Colombian pesos) on March 1, 2020. The lease is for a fixed term of five years commencing September 1, 2019. As at June 30, 2019, the Company had lease liability of $315,531. The Company used a discount rate of 5.20% in determining the present value of the lease payments.

Lease liability, January 1, 2019
 
$
315,531
 
Interest expense
   
-
 
Lease payments
   
-
 
Lease liability as at June 30, 2019
 
$
315,531
 

 
 
June 30, 2019
 
Current lease liability
 
$
5,374
 
Non-current lease liability
   
310,157
 
 
 
$
315,531
 

12. CAPITAL STOCK
a.
Authorized

Unlimited number of common shares, without par value

b.
Common shares issued

   
June 30, 2019
   
December 31, 2018
 
Share capital
 
$
1,764
   
$
1,764
 
Total
 
$
1,764
   
$
1,764
 

As of June 30, 2019, the Company’s share capital consists of 5,000 common shares at a value of $1,764 ($1,764 - December 31, 2018).

13. RELATED PARTY DISCLOSURES
The directors and officers owe the Company $1,575 as at June 30, 2019 ($1,539 – December 31, 2018).
F-37

COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)

14. COMMITMENTS AND CONTINGENCIES

Management contracts

The Company currently does not have management contracts. These contracts require payments of approximately $Nil to be made upon the occurrence of a change in control to the officers of the Company. The Company is also committed to payments upon termination of approximately $Nil pursuant to the terms of these contracts. As a triggering event has not taken place, these amounts have not been recorded in these financial statements.

Lease commitment

Pursuant to a lease agreement dated May 2, 2018, between C.I. Gramaluz S.C.A. and Cosechemos, Cosechemos has leased the Cosechemos farm, which is a 361 hectare property in Giron, Santander, Colombia. 

Effective September 1, 2019, Cosechemos shall pay approximately $2,900 (COP10,000,000) a month. On March 1, 2020, the monthly fee shall be increased to approximately $5,800 (COP20,000,000). Cosechemos has an option to purchase the Cosechemos Farm, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.

Pursuant to an (i) option to lease agreement dated December 27, 2018 between Waldshut C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm I, and (ii) option to lease agreement dated December 27, 2018 between Vicalvaro C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm II. The Palagua Farm I is a 700 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm II is a 1,432 hectare property in Palagua, Boyaca, Colombia.

Contingencies

Cannabis operations are subject to extensive controls and regulations imposed by various levels of government that may be amended from time to time. The Company’s operations may require licenses and permits from various governmental authorities in the countries in which it plans to operate. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out growth and development of its projects.

Although the Company has taken steps to verify title to the properties on which it will conduct its cannabis development and in which it has an interest, in accordance with industry standards for the current stage of operations of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, social licensing requirements, unregistered prior agreements, unregistered claims, and non-compliance with regulatory and environmental requirements. The Company’s assets may also be subject to increases in taxes and royalties, renegotiation of contracts, political uncertainty and currency exchange fluctuations and restrictions.

Environmental

The Company’s growth and development activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.


F-38


COSECHEMOS YA S.A.S.
Notes to the condensed interim financial statements
For the three and six months ended June 30, 2019 and 2018
(Expressed in United States dollars)
(Unaudited)

15. SUBSEQUENT  EVENTS
On July 16, 2019, the Company signed a share purchase agreement with Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa, collectively, the “Vendors”, to purchase 90% of Cosechemos S.A.S Ya (“Cosechemos”). Pursuant to the share purchase agreement, Flora acquired 4,500 shares of Cosechemos. As consideration for the Cosechemos shares, Flora (i) will pay $80,000 to the Vendors, and (ii) will grant the Vendors a 10% non-dilutive, free carried interest in Cosechemos, the (“Free Carry”). Pursuant to the agreement, Flora is required to pay the Vendors, as a one-time payment, $750,000 within 60 days of Cosechemos earning a net income of $10,000,000. To date, payments under this agreement have not been made.

The Free Carry will terminate upon Flora investing an aggregate of $25,000,000 into the Company.

The Company received loans from Flora in the amount of $212,380 in August 2019.
OFFERING

Flora is offering up to 40,000,000 (the “Maximum Offering”) units (the “Units”) of the Company to be sold in the offering (the “Offering”). Each Unit is comprised of one common share in the capital of the Company, with no par value per share (a “Common Share”), and one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”) to purchase one additional Common Share (a “Warrant Share”) at an exercise price of $1.00 per Warrant Share, subject to certain adjustments, over an 18-month exercise period following the date of issuance of the Warrant. The Units are being offered at a purchase price of $0.75 per Unit. Flora is selling the Units through a Tier 2 offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933. There is no assurance the Maximum Offering will be completed.

LEASE AGREEMENT

Pursuant to a lease agreement dated May 2, 2018, between C.I. Gramaluz S.C.A. and Cosechemos, Cosechemos has leased the Cosechemos farm, which is a 361 hectare property in Giron, Santander, Colombia. 

Effective September 1, 2019, Cosechemos shall pay approximately $2,900 (COP10,000,000) a month. On March 1, 2020, the monthly fee shall be increased to approximately $5,800 (COP20,000,000). Cosechemos has an option to purchase the Cosechemos Farm, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.

Pursuant to an (i) option to lease agreement dated December 27, 2018 between Waldshut C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm I, and (ii) option to lease agreement dated December 27, 2018 between Vicalvaro C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm II. The Palagua Farm I is a 700 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm II is a 1,432 hectare property in Palagua, Boyaca, Colombia.



F-39




Flora Growth Corp.




INTERIM FINANCIAL STATEMENTS

For the period from incorporation on March 13, 2019
to June 30, 2019


(Expressed in United States Dollars)




















F-40


Independent Auditors’ Report

To the Board of Directors and Shareholders of
Flora Growth Corp.
 
We have audited the accompanying interim financial statements of Flora Growth Corp., which comprise the interim statement of financial position as of June 30, 2019, and the related interim statements of loss and comprehensive loss, interim statement of shareholders’ equity (deficiency) and interim statement of cash flows for the period from incorporation on March 13, 2019 to June 30, 2019, and the related notes to the interim financial statements.
 
Management’s Responsibility for the Interim Financial Statements
 
Management is responsible for the preparation and fair presentation of these interim financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial statements that are free from material misstatement, whether due to fraud or error.
 
Auditors' Responsibility
 
Our responsibility is to express an opinion on these interim financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the interim financial statements are free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the interim financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the interim financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the interim financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the interim financial statements.
 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
Opinion
 
In our opinion, the interim financial statements referred to above present fairly, in all material respects, the financial position of Flora Growth Corp. as of June 30, 2019, and the results of their operations and their cash flows for the period from incorporation on March 13, 2019 to June 30, 2019 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
F-41


Emphasis of Matter Regarding Going Concern

The accompanying interim financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the interim financial statements, the Company does not have any operating assets that generate revenues, incurred a net loss of $1,899,714 during the period from incorporation on March 13, 2019 to June 30, 2019 and has a working capital deficit of $413,844 as at June 30, 2019. As stated in Note 1, substantial doubt exists about the Company’s ability to continue as a going concern. The interim financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

McGovern Hurley LLP
Chartered Professional Accountants
Licensed Public Accountants

Toronto, Ontario
September 26, 2019

F-42

Flora Growth Corp.
     
Interim Statement of Financial Position
     
(Expressed in United States dollars)
     
 
     
As at:
 
June 30, 2019
 
 
     
ASSETS
     
Current
     
Cash
 
$
-
 
Amounts receivable (Note 5)
   
238
 
Total assets
 
$
238
 
 
       
 
       
LIABILITIES
       
Current
       
Trade payables and accrued liabilities (Note 10)
 
$
414,082
 
Total liabilities
   
414,082
 
 
       
SHAREHOLDERS’ EQUITY (DEFICIECY)
       
      Share capital (Note 6(b))
   
1,400,000
 
      Options (Note 7)
   
85,870
 
      Warrants (Note 8)
   
-
 
      Deficit
   
(1,899,714
)
Total shareholders' equity (deficiency)
   
(413,844
)
Total liabilities and shareholders’ equity
 
$
238
 
 
       
 
       

Nature and continuance of operations (Note 1)
Commitments and contingencies (Note 11)
Subsequent events (Note 14)


APPROVED ON BEHALF OF THE BOARD

Signed “Damian Lopez”, DIRECTOR

Signed “Fred Leigh”, DIRECTOR

F-43



Flora Growth Corp.
Interim Statements of Loss and Comprehensive Loss
       
(Expressed in United States dollars)
       
         
   
For the three months ended
   
From period from incorporation on March 13, 2019 to June 30,
 
 
 
June 30, 2019
   
 2019
 
 
           
Expenses
           
Consulting and management fees (Note 6(b) and 10)
 
$
1,550,610
   
$
1,550,610
 
Professional fees
   
19,309
     
19,309
 
General office expenses
   
24,312
     
24,312
 
Travel expenses
   
219,613
     
219,613
 
Share based compensation (Note 7, 8, and 10)
   
85,870
     
85,870
 
                 
Loss and comprehensive loss for the period
 
$
1,899,714
   
$
1,899,714
 
 
               
Basic and diluted loss per share
 
$
0.82
   
$
0.99
 
 
Weighted average number of common shares outstanding – basic and diluted
   
2,307,692
     
1,926,606
 
                 


F-44


Flora Growth Corp.
                                   
Interim Statement of Shareholders' Equity
 
(Expressed in United States dollars)
                                   
                                     
 
                                   
 
 
Common Shares
   
Options
   
Warrants
   
Accumulated Deficit
   
Shareholders’
Equity (Deficiency)
 
     
#
   

$
   

$
   

$
   

$
   

$
 
 Balance, March 13, 2019
   
-
     
-
     
-
     
-
     
-
     
-
 
                                                 
 Common shares issued (Note 6(b))
   
70,000,000
     
1,400,000
     
-
     
-
     
-
     
1,400,000
 
 Options issued (Note 7)
   
-
     
-
     
85,870
     
-
     
-
     
85,870
 
 Warrants issued (Note 8)
   
-
     
-
     
-
     
-
     
-
     
-
 
 Loss for the period
   
-
     
-
     
-
     
-
     
(1,899,714
)
   
(1,899,714
)
                                                 
 Balance, June 30, 2019
   
70,000,000
     
1,400,000
     
85,870
     
-
     
(1,889,714
)
   
(413,844
)
                                                 



F-45


       
Flora Growth Corp.
     
Interim Statement of Cash Flows
(Expressed in United States dollars)
     
For the period from incorporation on March 13, 2019 to June 30, 2019
 

CASH FROM OPERATING ACTIVITIES:
     
    Net loss for the period
 
$
(1,899,714
)
         
    Share based compensation (Note 7 and 8)
   
85,870
 
    Bonus (Note 6(b))
   
1,400,000
 
     
(413,844
)
Net change in non-cash working capital
   
413,844
 
Net cash flows from operating activities
   
-
 
         
CHANGE IN CASH DURING THE PERIOD
   
-
 
         
CASH, beginning of the period
   
-
 
         
CASH, end of the period
 
$
-
 
         
F-46


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
1. NATURE AND CONTINUANCE OF OPERATIONS
Flora Growth Corp. (the “Company” or “Flora”) was incorporated under the laws of the Province of Ontario, Canada by Articles of Incorporation, dated March 13, 2019. The Company is focused on developing business for the purpose of cultivating, processing and supplying all natural, medicinal-grade cannabis oil, cannabis oil extracts and related products to large channel distributors, including pharmacies, medical clinics, and cosmetic companies. The Company’s head office is located at 65 Queen Street West, Suite 800, Toronto, Ontario, M5H 2M5, Canada.

Going concern

These interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company has a negative working capital position as at June 30, 2019 of $413,844. It will need to raise additional capital in the near term to fund its ongoing operations and business activities. While the Company has engaged in an offering of units (Note 14), there is no assurance that this financing will conclude. There is also no assurance that other financings will be available on terms acceptable to the Company or at all.

These interim financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and classifications in the interim statement of financial position that may be necessary were the Company unable to continue as a going concern and these adjustments could be material.

The business of cannabis growth and development of Cannabidiol (“CBD”) oils involves a high degree of risk and there can be no assurance that current business development programs will result in profitable cannabis operations. The Company’s continued existence is dependent upon the acquisition of assets, preservation of its interest in the underlying assets, acquisition of various licenses, the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary, or alternatively upon the Company’s ability to dispose of its assets and operations on an advantageous basis.

The Company does not have any operating assets that generate revenues and incurred a net loss of $1,899,714 during the period from incorporation on March 13, 2019 to June 30, 2019. As at June 30, 2019, the Company had a working capital deficit of $413,844. These conditions indicate the existence of material uncertainties which cast substantial doubt about the Company’s ability to continue as a going concern.

2. BASIS OF PRESENTATION
The following is a summary of significant accounting policies used in the preparation of these interim financial statements.
Statement of compliance

These interim financial statements of the Company were prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The preparation of interim financial statements in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company’s accounting policies.


F-47


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
2. BASIS OF PRESENTATION (continued)
Basis of presentation

The interim financial statements of the Company have been prepared on an accrual basis, except for cash flow information and are based on historical cost basis, except for certain financial instruments which are stated at their fair values. The interim financial statements are presented in United States dollars unless otherwise noted. These interim financial statements were approved and authorized by the Board of Directors of the Company on September 26, 2019.

3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies used in the preparation of these interim financial statements for the period from incorporation on March 13, 2019 to June 30, 2019.
Foreign currency translation

The presentation currency and functional currency of the Company is the United States dollar. Transactions in foreign currencies are recorded in the functional currency at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rates. Non-monetary items are translated at the exchange rates in effect on the date of the transactions. Foreign exchange gains and losses arising on translation are presented in the statement of loss and comprehensive loss.

Share based compensation

Share based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The Company operates an employee stock option plan. The corresponding amount is recorded to the stock option reserve. The fair value of options is determined using the Black–Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. On exercise of a stock option, any amount related to the initial value of the stock option, along with the proceeds from exercise are recorded to share capital. On expiry of a stock option, any amount related to the initial value of the stock option is recorded to deficit.

Provisions

General
Provisions are recognized when (a) the Company has a present obligation (legal or constructive) as a result of a past event, and (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain.

The expense relating to any provision is presented in the statement of operations, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost in the statement of loss.

Decommissioning obligations
The Company records a liability for the fair value of legal or constructive obligations associated with the decommissioning of long-lived tangible assets in the period in which they are incurred. The decommissioning liability is recognized at the present value of the estimated future cash flow associated with the decommissioning of the applicable assets or properties. On recognition of the liability there is a corresponding increase in the carrying amount of the related asset known as the decommissioning cost, which is depleted on a unit-of-production basis over the life of the reserves. The liability is adjusted each reporting period to reflect the passage of time using the discount rate, with the interest charged to earnings, and for revisions to the estimated future cash flows. Actual costs incurred upon settlement of the obligations are charged against the liability.

As at June 30, 2019, the Company did not have any material provisions, including decommissioning obligations.
F-48

Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash

Cash in the statement of financial position includes cash on hand and deposits held with banks that have a maturity of less than three months at the date they are acquired.

Amounts receivable

Amounts receivable are amounts that are due from others in the normal course of business. If collection is expected in one year or less, they are classified as current assets; if not, they are presented as noncurrent assets and discounted accordingly.

Financial assets

Initial recognition and measurement

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as “financial assets at fair value”, as either FVPL or FVOCI, and “financial assets at amortized costs”, as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost. Amounts receivable held for collection of contractual cash flows are measured at amortized cost.

Subsequent measurement – financial assets at amortized cost

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.

Subsequent measurement – Financial assets at FVPL

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the statement of financial position with changes in fair value recognized in other income or expense in the statement of loss. The Company does not measure any financial assets at FVPL.

Subsequent measurement – Financial assets at FVOCI

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income or loss in the statement of comprehensive loss. When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive income or loss and is not reclassified to profit or loss.

Dividends from such investments are recognized in other income in the statement of loss when the right to receive payments is established.

Derecognition

A financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership.
F-49

Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)

3.
SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial assets (continued)

Impairment of financial assets

The Company’s only financial assets subject to impairment are amounts receivable, which are measured at amortized cost. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable have been grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

Financial liabilities

Initial recognition and measurement

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. The Company’s financial liabilities include trade payables and accrued liabilities which are each measured at amortized cost.  All financial liabilities are recognized initially at fair value.

Subsequent measurement – financial liabilities at amortized cost

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR.

Subsequent measurement – Financial liabilities at FVPL

Financial liabilities measured at FVPL include any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial liabilities measured at FVPL are carried at fair value in the statement of financial position with changes in fair value recognized in other income or expense in the statement of loss.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the statement of loss.

Share capital

Proceeds from the issuance of common shares are classified as equity. Incremental costs directly attributable to the issue of common shares, stock options and warrants are recognized as a deduction from equity, net of any tax effects.

Interest expense

Interest expense is reported on an accrual basis using the effective interest method.

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
F-50

Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)


3.    SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes (continued)

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Loss per share

Basic loss per share is calculated using the weighted average number of shares outstanding during the period. Diluted loss per share reflects the potential dilution of commons share equivalents, such as outstanding options and warrants, in the weighted average number of common shares outstanding during the period, if dilutive. The diluted loss per share calculation excludes any potential conversion of options and warrants that would be anti-dilutive.

Accounting pronouncements not yet adopted

Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC that are mandatory for accounting periods beginning on or after January 1, 2019 or later periods. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IFRS 3 – Business Combinations (“IFRS 3”) was amended in October 2018 to clarify the definition of a business.  This amended definition states that a business must include inputs and a process and clarified that the process must be substantive and the inputs and process must together significantly contribute to operating outputs.  In addition it narrows the definitions of a business by focusing the definition of outputs on goods and services provided to customers and other income from ordinary activities, rather than on providing dividends or other economic benefits directly to investors or lowering costs and added a test that makes it easier to conclude that a company has acquired a group of assets, rather than a business, if the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets.  The amendments are effective for annual reporting periods beginning on or after January 1, 2020.  Earlier adoption is permitted.

For acquisitions that do not meet the definition of a business under IFRS 3, the Company follows International Accounting Standard (“IAS”) 37 and IAS 38 guidelines for asset acquisition, where the consideration paid is allocated to assets acquired based on fair values on the acquisition date and transactions costs are capitalized and allocated to the assets acquired.

IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics.  The revised definition focuses on the idea that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.  The amendments are effective for annual reporting periods beginning on or after January 1, 2020.  Earlier adoption is permitted.

F-51


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
4. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTIES
The preparation of the interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions about future events that affect the amounts reported in the interim financial statements and related notes to the interim financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results could differ from those estimates and these estimates could be material.

The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to:

Determination of functional currency

The Company determines the functional currency through an analysis of several indicators such as financing activities, cash flows from operating activities and frequency of transactions within the reporting entity.

Assets’ carrying values and impairment charges

In the determination of carrying values and impairment charges, management looks at the higher of recoverable amount or fair value less costs to sell in the case of assets and at objective evidence, significant or prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period.

Asset acquisition versus business combination

The determination of whether a transaction meets the definition of a business combination or constitutes an asset acquisition under IFRS 3.

Income, value added, withholding and other taxes

The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the interim financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.
Income taxes and recoverability of potential deferred tax assets 
In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. The Company considers relevant tax planning opportunities that are within the Company’s control, are feasible and within management’s ability to implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of the relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses unrecognized income tax assets at each reporting period.

F-52

Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
4. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTIES (continued)
Share based payment transactions
The Company measures the cost of equity-settled transactions with employees and applicable non-employees by reference to the fair value of the equity instruments at the date at which they are vested. Estimating fair value for share based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the stock price, stock option, risk-free interest rates, volatility and dividend yield and making assumptions about them.

Contingencies and provisions

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal proceedings that are pending against us, un-asserted claims, that may result in such proceedings or regulatory or government actions that may negatively impact our business or operations, the Company and its legal counsel evaluate the perceived merits of any legal proceedings or un-asserted claims or actions as well as the perceived merits of the nature and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or assessing the impact on the carrying value of assets. Contingent assets are not recognized in the interim financial statements.

5. AMOUNTS RECEIVABLE
The amounts receivable balance as at June 30, 2019 consists of amounts receivable from the Government of Canada for Harmonized Sales Taxes (“HST”).

   
June 30, 2019
 
       
HST receivable
 
$
238
 
Total
 
$
238
 

6. CAPITAL STOCK
a.
Authorized

Unlimited number of common shares, without par value

b.
Common shares issued

 
 
 Number of shares
 
 Stated value $
Balance, March 13, 2019
 
                -
 
  $                       -
         
Bonus shares
 
    70,000,000
 
            1,400,000
Balance, June 30, 2019
 
    70,000,000
 
    $        1,400,000

On June 27, 2019, the Company granted bonuses of $1,400,000 to consultants, directors and officers of the Company. The bonuses were settled by the issuance of 70,000,000 common shares at a price of $0.02 per share for a value of $1,400,000 based on the value of services agreed upon by the consultants, directors, officers and the Company. Of the 70,000,000 common shares issued, a total of 14,950,000 common shares with a value of $299,000 was granted to the directors and officers of the Company (See Note 10).
F-53

Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
7. OPTIONS
The Company has a stock option plan whereby it may grant options for the purchase of common shares to any director, consultant, employee or officer of the Company or its subsidiaries. The aggregate number of shares that may be issuable pursuant to options granted under the Company’s stock option plan will not exceed 10% of the issued common shares of the Company (the “Shares”) at the date of grant. The options are non-transferable and non-assignable and may be granted for a term not exceeding five years. The exercise price of the options will be determined by the board at the time of grant, but in the event that the Shares are traded on any  stock exchange (the “Exchange”), may not be less than the closing price of the Shares on the Exchange on the trading date immediately preceding the date of grant, subject to all applicable regulatory requirements.

Information relating to share options outstanding as at June 30, 2019 is as follows:

 
 
Number of options
   
Weighted average exercise price
 
Balance, March 13, 2019
   
-
   
$
-
 
Granted
   
7,000,000
     
0.05
 
 
               
Balance, June 30, 2019
   
7,000,000
   
$
0.05
 

Date
 Options
 Options
Exercise
 Grant date
 Remaining life
of expiry
 outstanding
 exercisable
price
 fair value
 in years
           
June 28, 2024
          7,000,000
          7,000,000
$0.05
 $               85,870
                  5.00
 
          7,000,000
          7,000,000
 
 $               85,870
                  5.00

On June 28, 2019, the Company granted 7,000,000 options to directors, officers and consultants of the Company with an exercise price of $0.05 per common share. The options vested immediately. The fair market value of the options was estimated to be $85,870 using the Black Scholes option pricing model based on the following assumptions: risk‑free rate of 1.39%, estimated current stock price of $0.02, expected volatility of 100% based on comparable companies, an estimated life of 5 years and an expected dividend yield of 0%. Of the 7,000,000 options granted, 3,800,000 options with a value of $46,615 were granted to the directors and officers of the Company (See Note 10).
8. WARRANTS
On March 15, 2019, the Company granted 7,000,000 founder warrants of the Company with an exercise price of $0.05 per common share. The fair market value of the warrants was estimated to be $Nil using the Black Scholes option pricing model based on the following assumptions: risk‑free rate of 1.63%, estimated current stock price of $Nil, expected volatility of 100%, based on comparable companies, an estimated life of 3 years and an expected dividend yield of 0%. A total of 7,000,000 warrants with a value of $Nil were granted to the directors and officers of the Company (See Note 10).

F-54

Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
8. WARRANTS (continued)
 
 
Number of warrants
   
Weighted average exercise price
 
Balance, March 13, 2019
   
-
   
$
-
 
Granted
   
7,000,000
     
0.05
 
Balance, June 30, 2019
   
7,000,000
   
$
0.05
 

Date of expiry
Warrants outstanding
Exercise price
Grant date
fair value
Remaining life in years
         
March 15, 2022
    7,000,000
 $    0.05
 $               -
               2.71
 
    7,000,000
 
 $               -
               2.71

9.                     INCOME TAXES

a)
Provision for income taxes

Major items causing the Company's effective income tax rate to differ from the combined Canadian federal and provincial statutory rate of 26.5% were as follows:
   
June 30, 2019
 
 
 

$
 
(Loss) before income taxes
   
(1,899,714
)
         
Expected income tax recovery based on statutory rate
   
(503,000
)
Adjustment to expected income tax benefit:
       
Stock based compensation
   
394,000
 
Change in benefit not recognized
   
109,000
 
Deferred income tax provision (recovery)
   
-
 

b)
Deferred income tax

Deferred tax assets have not been recognized in respect of the following deductible temporary differences:

   
June 30, 2019
 
 
 

$
 
         
Non-capital loss carry-forwards
   
412,000
 
Total
   
412,000
 
         
As at June 30, 2019 the Company estimates non-capital losses for Canadian income tax purposes of approximately $412,000 available to use against future taxable income. The non-capital losses expire in 2039.
F-55


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
10. RELATED PARTY DISCLOSURES
Key management personnel compensation

In addition to their contracted fees, directors and officers also participate in the Company’s share option program. Certain executive officers are subject to termination notices of twenty-four months and change of control contingent provisions (Note 11). Key management personnel compensation comprised, see Notes 6(b), 7, 8:

 
 
Three months ended June 30, 2019
   
Period from incorporation from March 13, 2019 to June 30, 2019
 
Directors & officers’ compensation
 
$
80,231
   
$
95,759
 
Share based payments
   
345,615
     
345,615
 
 
 
$
425,846
   
$
441,374
 

Included in the amounts payable and accrued liabilities as at June 30, 2019 is $43,105 owed to 2227929 Ontario Inc. for consulting, rent and promotion services. Fred Leigh is a director of the Company and is also a director and officer of 2227929 Ontario Inc. These amounts are non-interest bearing and due on demand.

The above directors’ and officers’ compensation are included in the amounts payable and accrued liabilities as at June 30, 2019.

11. COMMITMENTS AND CONTINGENCIES

Management contracts

The Company is party to certain management contracts. Currently, these contracts require payments of approximately CAD$1,710,000 to be made upon the occurrence of a change in control to the officers of the Company. The Company is also committed to payments upon termination of approximately CAD$1,347,000 pursuant to the terms of these contracts. As a triggering event has not taken place, these amounts have not been recorded in these interim financial statements.

Share space commitment

The Company has an agreement to share office space with other companies with a minimum commitment of $45,000.

Contingencies

Cannabis operations are subject to extensive controls and regulations imposed by various levels of government that may be amended from time to time. The Company’s operations may require licenses and permits from various governmental authorities in the countries in which it plans to operate. There can be no assurance that the Company will be able to obtain all necessary licenses and permits that may be required to carry out growth and development of its projects.

Although the Company has taken steps to verify title to the properties on which it will conduct its cannabis development and in which it has an interest, in accordance with industry standards for the current stage of operations of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, social licensing requirements, unregistered prior agreements, unregistered claims, and non-compliance with regulatory and environmental requirements. The Company’s assets may also be subject to increases in taxes and royalties, renegotiation of contracts, political uncertainty and currency exchange fluctuations and restrictions.

Licenses and authorizations that will be held by the Company or companies which will be acquired by Flora, are subject to ongoing compliance and reporting requirements. The ability to obtain, sustain or renew any such licenses and authorizations on acceptable terms are subject to changes in regulations and policies and to the discretion of the applicable authorities or other governmental agencies. Failure to comply with the requirements of the licenses or authorizations or any failure to maintain the licenses or authorizations could have a material adverse impact on our business, financial condition and operating results.
F-56


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Environmental

The Company’s growth and development activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

Fair value

The Company’s financial instruments measured at amortized cost as at June 30, 2019, consist of amounts receivable, trade payables and accrued liabilities, and the amounts reflected in the statements of financial position approximate fair value due to the short term maturity of these instruments.

Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fair value based on:

Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; and
Level 3 - inputs for the instruments are not based on any observable market data.

The Company had no financial instruments recorded at fair value in the statement of financial position at June 30, 2019.

Fair value estimates are made at the relevant transaction date, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties in significant matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

Risk management overview

The Company has exposure to credit, liquidity and market risks from its use of financial instruments. This note provides information about the Company’s exposure to each of these risks, the Company’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these interim financial statements.

Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s amounts receivables.

The carrying amount of amounts receivable represents the maximum credit exposure. As at June 30, 2019, the Company’s total receivable was $238 from the Government of Canada for Harmonized Sales Taxes.

Market risk

Market risk is the risk that changes in market conditions, such as commodity prices, foreign exchange rates, and interest rates, will affect the Company’s net income or the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing the Company’s returns.

(i)
Commodity price risk
Commodity price risk is the risk that future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for cannabis seeds and plants are impacted by not only the relationship between the Colombian peso, Canadian and United States dollar, as outlined below, but also global economic events that dictate the levels of supply and demand. Lower commodity prices can also reduce the Company’s ability to raise capital. As the Company is not generating revenues, commodity price risk does not directly impact the Company’s financial results.
F-57


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

(ii)
Foreign exchange risk
Foreign currency exchange rate risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in foreign exchange rates.


As at June 30, 2019, the Company had the following liabilities denominated in foreign currencies:

June 30, 2019
CAD
Trade payables
                           $         2,703
  Accrued liabilities
519,010
 
                           $     521,713

(iii)
Interest exchange risk
             The Company has no cash balance as at June 30, 2019.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with the financial liabilities. The Company’s financial liabilities consist of trade payables and accrued liabilities of $414,082 as at June 30, 2019. The Company has no cash as at June 30, 2019.

Trade payables and accrued liabilities consist of invoices payable to trade suppliers for administration and professional expenditures. The Company processes invoices within a normal payment period. Trade payables have contractual maturities of less than 90 days.

Price risk

The Company is exposed to price risk with respect to commodity prices. Commodity prices fluctuate on a daily basis and are affected by numerous factors beyond the Company’s control. The supply and demand for commodities, the level of interest rates, the rate of inflation, investment decisions by large holders of commodities including governmental reserves and stability of exchange rates can all cause significant fluctuations in commodities prices. Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems and political developments.

Sensitivity analysis

The Company has, for accounting purposes, designated its amounts receivable as loans and receivables which are measured at amortized cost. Trade payables and accrued liabilities are classified for accounting purposes as other financial liabilities, which are measured at amortized cost. As of June 30, 2019, both the carrying and fair value amounts of the Company's financial instruments are approximately equivalent due to the short-term maturity of these instruments.

The sensitivity analysis shown in the notes below may differ materially from actual results. Based on management's knowledge of and experience with the financial markets, the Company believes the following movements are "reasonably possible".

Trade payables and accrued liabilities denominated in Canadian and United States dollars are subject to foreign currency risk. As at June 30, 2019, had the United States dollar weakened/strengthened by 5% against the Canadian dollar with all other variables held constant, there would have been a change of approximately $19,932 in the Company’s net loss.

13. CAPITAL MANAGEMENT
The Company will consider the aggregate of its common shares and deficit as capital. The Company’s objective, when managing capital, is to ensure sufficient resources are available to meet day to day operating requirements and to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.
F-58


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
13. CAPITAL MANAGEMENT (continued)
At June 30, 2019, the Company has no cash-generating operations; therefore, the only source of cash flow is generated from financing activities or loans. The Company’s officers and senior management are in the process of searching for additional business opportunities. Potential business activities are appropriately evaluated by senior management and a formal review and approval process has been established at the Board of Directors’ level. The Company may enter into new financing arrangements to meet its objectives for managing capital, until such time as a viable business activity is operational and the Company can thereby internally generate sufficient capital to cover its operational requirements.
The Company’s officers and senior management take full responsibility for managing the Company’s capital and do so through quarterly meetings and regular review of financial information. The Company’s Board of Directors is responsible for overseeing this process.

14. SUBSEQUENT EVENTS
SHARE PURCHASE AGREEMENT

On July 16, 2019, the Company signed a share purchase agreement with Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa, collectively, the “Vendors”, to purchase 90% of Cosechemos S.A.S Ya (“Cosechemos”). Pursuant to the share purchase agreement, Flora acquired 4,500 shares of Cosechemos on October 2, 2019. As consideration for the Cosechemos shares, Flora agreed to (i) pay $80,000 to the Vendors, and (ii) grant the Vendors a 10% non-dilutive, free carried interest in Cosechemos, the (“Free Carry”). Pursuant to the agreement, Flora is required to pay the Vendors, as a one-time payment, $750,000 within 60 days of Cosechemos earning a net income of $10,000,000. To date, no payments under this agreement have been made.

The Free Carry will terminate upon Flora investing an aggregate of $25,000,000 in Cosechemos.

SHAREHOLDER AGREEMENT

In August 2019, the Company, Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa signed a shareholders’ agreement with Cosechemos, the legal and beneficial owner of 100% interest of non-psychoactive cannabis license in Colombia.

LOAN AGREEMENT

The Company entered into a loan agreement with Copper One Inc. for an amount up to $500,000 of which $285,380 has been drawn down. The loan bears interest at 10% annually and is payable on demand. Stan Bharti and Deborah Battiston are the Chairman and Chief Financial Officer of the Company and of Copper One. These funds were sent to provide support to Cosechemos and to provide working capital for the Company.
OFFERING AND BROKER DEALER ARRANGEMENT

Flora is offering up to 40,000,000 (the “Maximum Offering”) units (the “Units”) of the Company to be sold in the offering (the “Offering”). Each Unit is comprised of one common share in the capital of the Company, with no par value per share (a “Common Share”), and one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”) to purchase one additional Common Share (a “Warrant Share”) at an exercise price of $1.00 per Warrant Share, subject to certain adjustments, over an 18-month exercise period following the date of issuance of the Warrant. The Units are being offered at a purchase price of $0.75 per Unit. Flora is selling the Units through a Tier 2 offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933. There is no assurance the Maximum Offering will be completed.

On September 6, 2019, the Company signed a broker-dealer agreement with Dalmore Group LLC (“Dalmore”), to provide operation and compliance services. The Company shall pay a fee equal to 3% on the aggregate amount of funds raised by Dalmore from investors in Washington, Arizona, Texas, Alabama, North Dakota, Florida and New Jersey. There is also a one time advance set up fee of $25,000. The agreement is also subject of a 60 day written termination notice by either the Company or Dalmore.
F-59


Flora Growth Corp.
Notes to the interim financial statements
For the period from incorporation on March 13, 2019 to June 30, 2019
(expressed in United States dollars)
14. SUBSEQUENT EVENTS (continued)
LEASE AGREEMENT

Pursuant to a lease agreement dated May 2, 2018, between C.I. Gramaluz S.C.A. and Cosechemos, Cosechemos has leased the Cosechemos farm, which is a 361 hectare property in Giron, Santander, Colombia. 

Effective September 1, 2019, Cosechemos shall pay approximately $2,900 (COP10,000,000) a month. On March 1, 2020, the monthly fee shall be increased to approximately $5,800 (COP20,000,000). Cosechemos has an option to purchase the Cosechemos Farm, in whole or in part, at a price to be determined by an arm’s length third party appraiser from the real estate association of Bogota, Colombia.

Pursuant to an (i) option to lease agreement dated December 27, 2018 between Waldshut C.V. and Cosechemos, Cosechemos has the option to lease the Palagua Farm I, and (ii) option to lease agreement dated December 27, 2018 between Vicalvaro C.V. and Cosechemos, Cosechemos the option to lease the Palagua Farm II. The Palagua Farm I is a 700 hectare property in Palagua, Boyaca, Colombia. The Palagua Farm II is a 1,432 hectare property in Palagua, Boyaca, Colombia.
F-60

Flora Growth Corp.

Unaudited Pro Forma Condensed Consolidated Financial Statements
(Expressed in United States dollars)
As at June 30, 2019 and December 31, 2018








F-61

Flora Growth Corp.
                             
Pro Forma Condensed Consolidated Statement of Financial Position
                         
As at June 30, 2019
                             
(Unaudited, Expressed in United States Dollars)
                             
 
 
Flora Growth Corp
   
Cosechemos Ya S.A.S
   
Note 5
   
Pro Forma Adjustments
   
Pro Forma Consolidated
 
 
 
 
June 30, 2019
   
June 30, 2019
                   
ASSETS
                             
Current assets
                             
Cash (Note 4)
 
$
-
   
$
-
       
a
 
$
30,000,000
   
$
48,777,000
 
 
                     
a
   
20,000,000
         
 
                     
b
   
(1,143,000
)
       
 
                     
c
   
345,747
         
           (Note 3)
                     
d
   
(80,000
)
       
 
                     
e
   
(345,747
)
       
Amounts receivable
   
238
     
1,575
                     
1,813
 
Prepaid
   
-
     
3
                     
3
 
Biological asset
   
-
     
11,096
                     
11,096
 
Total current assets
   
238
     
12,674
             
48,777,000
     
48,789,912
 
         Right-of-use asset
   
-
     
315,531
                     
315,531
 
Intangible asset
   
-
     
1,048
             
81,175
     
82,223
 
Total assets
 
$
238
   
$
329,253
   
$
-
   
$
48,858,175
   
$
49,187,666
 
LIABILITIES
                                       
Current liabilities
                                       
Accounts payable and accrued liabilities
 
$
414,082
   
$
15,027
                   
$
429,109
 
Loan payable
   
-
     
-
       
c
   
345,747
     
-
 
 
                     
e
   
(345,747
)
       
Current lease liability
   
-
     
5,374
                     
5,374
 
Total current liabilities
   
414,082
     
20,401
                     
434,483
 
Non-current lease liability
   
-
     
310,157
                     
310,157
 
Total liabilities
   
414,082
     
330,558
                     
744,640
 
SHAREHOLDERS' EQUITY
                                       
Share capital (Note 3)
   
1,400,000
     
1,764
       
a
   
22,777,070
     
50,257,000
 
 
                     
a
   
20,000,000
         
 
                     
a
   
7,222,930
         
 
                     
b
   
(1,143,000
)
       
 
                     
d
   
(1,764
)
       
Options
   
85,870
     
-
                     
85,870
 
Warrants
   
-
     
-
       
a
   
7,222,930
     
-
 
 
                     
a
   
(7,222,930
)
       
Deficit
   
(1,899,714
)
   
(3,005
)
     
d
   
3,005
     
(1,899,714
)
Accumulated other comprehensive income
   
-
     
(64
)
     
d
   
64
     
-
 
Equity attributable to owners of the parent
   
(413,844
)
   
(1,305
)
           
48,858,305
     
48,443,156
 
Non-controlling interest
   
-
     
-
       
d
   
(131
)
   
(131
)
Total shareholders' equity
   
(413,844
)
   
(1,305
)
           
48,858,175
     
48,443,026
 
Total liabilities and shareholders' equity
 
$
238
   
$
329,253
           
$
48,858,175
   
$
49,187,666
 

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.

F-62



Flora Growth Corp.
                             
Pro Forma Condensed Consolidated Statement of Loss and Comprehensive Loss
                   
From January 1, 2019 to June 30, 2019
                             
(Unaudited, Expressed in United States Dollars)
                             
 
 
Flora Growth Corp
   
Cosechemos Ya S.A.S
   
Note 5
   
Pro Forma Adjustments
   
Pro Forma Consolidated
 
 
 
 
June 30, 2019
   
June 30, 2019
                   
EXPENSES
                             
Consulting and management fees
 
$
1,550,610
   
$
-
         
$
-
   
$
1,550,610
 
Professional fees
   
19,309
     
-
           
-
     
19,309
 
General administration expense
   
24,312
     
1,295
       
d
   
(1,295
)
   
24,312
 
Travel expenses
   
219,613
     
779
       
d
   
(779
)
   
219,613
 
Shared based compensation
   
85,870
     
-
       
d
   
-
     
85,870
 
Interest expense
   
-
     
315
       
d
   
(315
)
   
-
 
Amortization
   
-
     
28
       
d
   
(28
)
   
-
 
Income tax expense
   
-
     
577
       
d
   
(577
)
   
-
 
Loss for the period
   
1,899,714
     
2,994
             
(2,994
)
   
1,899,714
 
Other comprehensive loss
                                       
Foreign currency translation
   
-
     
(161
)
     
d
   
161
     
-
 
Comprehensive loss for the period
 
$
1,899,714
   
$
2,833
           
$
(2,833
)
 
$
1,899,714
 
 
                                       
Comprehensive loss for the period attributable to:
                                       
Owners of the parent
   
1,899,714
     
2,833
             
(2,964
)
   
1,899,584
 
Non-controlling interest
   
-
     
-
       
d
   
131
     
131
 
Comprehensive loss for the period
 
$
1,899,714
   
$
2,833
           
$
(2,833
)
 
$
1,899,714
 




The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.


F-63


Flora Growth Corp.
                       
Pro Forma Condensed Consolidated Statement of Loss and Comprehensive Loss
             
From January 1, 2018 to December 31, 2018
                       
(Unaudited, Expressed in United States Dollars)
                       
 
 
Cosechemos Ya S.A.S
   
Note 5
   
Pro Forma Adjustments
   
Pro Forma Consolidated
 
 
 
 
December 31, 2018
                   
 
                       
EXPENSES
                       
General administration expense
 
$
-
       
d
 
$
(1,295
)
 
$
(1,295
)
Travel expenses
   
-
       
d
   
(779
)
   
(779
)
Interest expense
   
-
       
d
   
(315
)
   
(315
)
Amortization
   
-
       
d
   
(28
)
   
(28
)
Income tax expense
   
4
       
d
   
(577
)
   
(573
)
Loss for the period
   
4
             
(2,994
)
   
(2,990
)
Other comprehensive loss
                               
Foreign currency translation
   
137
             
(137
)
   
-
 
Comprehensive loss for the year
 
$
141
           
$
(3,131
)
 
$
(2,990
)
 
                               
Comprehensive loss for the period attributable to:
                               
Owners of the parent
   
141
             
(3,262
)
   
(3,121
)
Non-controlling interest
   
-
             
131
     
131
 
Comprehensive loss for the year
 
$
141
           
$
(3,131
)
 
$
(2,990
)

Flora Growth Corp. was incorporated on March 13, 2019 and therefore its historical financial position is not shown in a separate column in this unaudited pro forma condensed statement of loss and comprehensive loss for the year ended December 31, 2018.


The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
F-64

Flora Growth Corp.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
(Stated in United States dollars)

1. BASIS OF PRESENTATION

These unaudited pro forma condensed consolidated financial statements of Flora Growth Corp. (“Flora”)(the “Company”) were prepared by management consistent with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) for illustrative purposes only, to show the effect of the acquisition of 90 per cent of Cosechemos Ya S.A.S (“Cosechemos”) through a share purchase agreement dated July 16, 2019 by Flora (collectively the “Acquisition”).  For accounting purposes, the Acquisition will be accounted as an asset acquisition as the acquisition did not meet the definition of a business combination under IFRS 3. The Company follows International Accounting Standard (“IAS”) 37 and IAS 38 guidelines for asset acquisition, where the consideration paid is allocated to assets acquired based on fair values on the acquisition date and transactions costs are capitalized and allocated to the assets acquired.

The unaudited pro forma condensed consolidated statement of financial position has been compiled from and include:
i.
The unaudited interim condensed consolidated statement of financial position of Flora as at June 30, 2019;
ii.
The unaudited interim condensed consolidated statement of financial position of Cosechemos as at June 30, 2019;

The unaudited pro forma condensed consolidated statements of loss and comprehensive loss has been compiled from and include:
iii.
The unaudited interim condensed statement of loss and comprehensive loss of Flora for the period from incorporation on March 13, 2019 to June 30, 2019;
iv.
The unaudited interim condensed statement of loss and comprehensive loss of Cosechemos for the six months June 30, 2019; and
v.
The unaudited interim condensed statement of loss and comprehensive loss of Cosechemos for the year ended December 31, 2018.

The unaudited pro forma condensed consolidated statement of financial position and statements of loss and comprehensive loss have been prepared as if the acquisition described in Note 3 and the offering in Note 4 had occurred as of June 30, 2019.

It is management’s opinion that these unaudited pro forma condensed consolidated financial statements present, in all material respects, the acquisition described in Note 3 and offering in Note 4, in accordance with IFRS, applied on a basis consistent with Flora’s accounting policies.  These unaudited pro forma condensed consolidated financial statements are not intended to reflect the financial position or results of operations of the combined entity which would have actually resulted if the events reflected herein had been in effect at the dates indicated.  Actual amounts recorded once the acquisition is completed are likely to differ from those recorded in the unaudited pro forma condensed consolidated financial statements. Any potential synergies that may be realized and integration costs that may be incurred upon consummation of the acquisition have been excluded from the unaudited pro forma condensed consolidated financial statements.  Further, these unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the financial position or results of operation that may be obtained in the future.

These unaudited pro forma condensed consolidated financial statements should be read in conjunction with the foregoing financial statements, including the notes thereto, included Regulation A Offering Circular (“Reg A”) under the securities act of 1933 as filed on the U.S Securities and Exchange Commission website.

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in the preparation of these unaudited pro forma condensed consolidated financial statements are those as set out in Flora’s audited interim financial statements for the period from incorporation on March 13, 2019 to June 30, 2019.  In preparing the unaudited pro forma condensed consolidated financial information, a review was undertaken to identify any accounting policy differences to Flora where the impact was potentially material and could be reasonably estimated.  Upon review, no material differences were noted. Accounting policy differences may be identified after completion of the acquisition.
F-65


Flora Growth Corp.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
(Stated in United States dollars)
3. ACQUISITION

On July 16, 2019, the Company signed a share purchase agreement with Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa, collectively, the “Vendors”, to purchase 90% of Cosechemos S.A.S Ya (“Cosechemos”). Pursuant to the share purchase agreement, Flora acquired 4,500 shares of Cosechemos on October 2, 2019. As consideration for the Cosechemos shares, Flora agreed to (i) pay $80,000 to the Vendors, and (ii) grant the Vendors a 10% non-dilutive, free carried interest in Cosechemos, the (“Free Carry”). Pursuant to the agreement, Flora is required to pay the Vendors, as a one-time payment, $750,000 within 60 days of Cosechemos earning a net income of $10,000,000. To date, no payments under this agreement have been made.

The Free Carry will terminate upon Flora investing an aggregate of $25,000,000 in Cosechemos.

The purchase consideration has been allocated on a preliminary basis to the fair value of the assets acquired and liabilities assumed as at June 30, 2019 based on management’s best estimate of fair value and taking into account all available information at the time of the share purchase agreement.

Acquisition of Cosechemos Ya. S.A.S
     
Preliminary purchase price allocation
 
Estimated fair value
 
       
Consideration:
     
        Cash
 
$
80,000
 
 
 
$
80,000
 
         
Allocation of purchase price:
       
       Amounts receivable
 
$
1,575
 
       Prepaid expenses
   
3
 
       Biological asset
   
11,096
 
       Right-of-use asset
   
315,531
 
       Trade payables and accrued liabilities
   
(15,027
)
       Current lease liability
   
(5,374
)
       Non-current lease liability
   
(310,157
)
       Minority interest
   
131
 
       Intangible asset
   
82,223
 
 
 
$
80,000
 

Management will continue to review information and perform further analysis with respect to the valuation of the purchase consideration and the net assets acquired, prior to finalizing the allocation of the purchase price.

4. THE OFFERING

Flora is offering up to 40,000,000 (the “Maximum Offering”) units (the “Units”) of the Company to be sold in the offering (the “Offering”). Each Unit is comprised of one common share in the capital of the Company, with no par value per share (a “Common Share”), and one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”) to purchase one additional Common Share (a “Warrant Share”) at an exercise price of $1.00 per Warrant Share, subject to certain adjustments, over an 18-month exercise period following the date of issuance of the Warrant. The Units are being offered at a purchase price of $0.75 per Unit. Flora is selling the Units through a Tier 2 offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933. The maximum expected gross proceeds of the offering have been allocated on a pro forma basis $42,777,070 to the commons shares and $7,222,930 to the warrants. There can be no assurance the maximum or any proceeds of the Offering can be achieved.
F-66


Flora Growth Corp.
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
(Stated in United States dollars)
5. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS

The unaudited pro forma condensed consolidated statements of financial position and consolidated statements of loss and comprehensive loss reflect the following assumptions and adjustments to give effect to the Acquisition described in Note 3 and the Offering in Note 4 as if the Acquisition and Offering had occurred as of June 30, 2019:

(a)
To record the receipt of the Offering for gross proceeds of $50,000,000 with the exercise of 20,000,000 warrants.

(b)
To record estimated transaction costs of $1,143,000.

(c)
To record loans received from Copper One.

(d)
To record the acquisition of 90% of Cosechemos, Note 3.

(e)
To record the repayment of short term loans.

6. PRO FORMA SHARE CAPITAL
 
Number of shares
       $
     
Number of shares held by Flora shareholders
  70,000,000
 $    1,400,000
Commons shares expected to be issued through the Maximum Offering
  60,000,000
      50,000,000
Transaction costs
 
(1,143,000)
Pro forma common shares at June 30, 2019
130,000,000
     $  50,257,000


7. INCOME TAXES

The effective pro forma income tax rate is approximately 26.5%.
F-67


PART III – EXHIBITS
Exhibit No.
 
Description
 
 
 
EX1A-2.1†
 
Certificate of Incorporation of Flora Growth Corp.
 
 
 
EX1A-2.2†
 
Bylaws of Flora Growth Corp.
 
 
 
EX1A-4.1†
 
Form of Subscription Agreement.
 
 
 
EX1A-4.2†
 
Form of Common Share Purchase Warrant.
 
 
 
EX1A-6.1†
 
Consulting Agreement dated March 14, 2019 between Flora Growth Corp. and Forbes & Manhattan, Inc.
 
 
 
EX1A-6.2†
 
Consulting Agreement dated March 14, 2019 between Flora Growth Corp. and Stan Bharti.
 
 
 
EX1A-6.3†
 
Consulting Agreement dated March 14, 2019 between Flora Growth Corp. and Damian Lopez.
 
 
 
EX1A-6.4†
 
Consulting Agreement dated March 14, 2019 between Flora Growth Corp. and Jadan Consulting Corporation.
 
 
 
EX1A-6.5†
 
Consulting Agreement dated September 11, 2019 between Flora Growth Corp. and Orlando Bustos.
 
 
 
EX1A-6.6†
 
Form of Founder Warrant to Purchase Common Shares of Flora Growth Corp.
 
 
 
EXA1-6.7†
 
Broker-Dealer Agreement dated September 6, 2019 between Flora Growth Corp. and Dalmore Group, LLC.
     
EX1A-6.8†
 
Consulting Agreement dated September 6, 2019 between Flora Growth Corp. and DALV Consulting, LLC.
 
 
 
EX1A-6.9†
 
Shared Costs Services Agreement dated March 14, 2019 between Flora Growth Corp. and 2227929 Ontario Inc.
 
 
 
EX1A-6.10†
 
Promissory Lease With Option to Sale and Purchase Agreement dated December 27, 2018 between Cosechemos YA S.A.S. and Waldshut C.V.

57

 
 
 
EX1A-6.11†
 
Promissory Lease With Option to Sale and Purchase Agreement dated December 27, 2018 between Cosechemos YA S.A.S. and Vicalvaro C.V.
 
 
 
EX1A-6.12†
 
Lease Agreement dated May 2, 2018 between Cosechemos YA S.A.S. and C.I Gramulaz S.C.A
     
EX1A-6.13†
 
Amendment to Lease Agreement dated September 1, 2019 between Cosechemos YA S.A.S. and C.I Gramulaz S.C.A.
     
EX1A-6.14†
 
Loan Agreement dated August 6, 2019 between Flora Growth Corp. and Copper One Inc., as amended on September 12, 2019.
 
 
 
EX1A-6.15†
 
Shareholders’ Agreement dated October 2, 2019 among Flora Growth Corp., Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa.
     
EX1A-6.16†
 
Flora Growth Corp. Stock Option Plan.
     
EX1A-6.17†
 
Form of Stock Option Agreement.
 
 
 
EX1A-7.1†
 
Share Purchase Agreement dated July 16, 2019 among Flora Growth Corp., Guillermo Andres Ramirez Martinez, Guillermo Ramirez Cabrales and Oscar Mauricio Franco Ulloa.
 
 
 
EX1A-10.1†
 
Power of Attorney (included on signature page hereto).
 
 
 
EX1A-11.1†
 
Consent of McGovern Hurley LLP.
     
EX1A-11.1†
 
Consent of RSM Colombia SAS.
 
 
 
EX1A-12.1†
 
Opinion of Wildeboer Dellelce LLP.
 
 
 
EX1A-14.1†
 
Appointment of Agent for Service of Process.

† Filed herewith.
# Previously filed.
58

SIGNATURES
Pursuant to the requirements of Regulation A+, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toronto, Province of Ontario, Canada, on October 10, 2019.
  FLORA GROWTH CORP.  
       
Date: October  10, 2019
By:
/s/Damian Lopez  
    Name:Damian Lopez  
    Title:Chief Executive Officer  
       
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Damian Lopez his or her true and lawful attorney‑in‑fact and agent, with full power of substitution, for her or him and in her or his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 1-A offering statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or her or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
This offering statement has been signed by the following persons in the capacities and on the dates indicated.
/s/Damian Lopez
Name: Damian Lopez
Title:   Chief Executive Officer, President and Director
(Principal Executive Officer)

Date:  October  10, 2019
/s/Deborah Battiston
Name: Deborah Battiston
Title:   Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

Date:  October  10, 2019
/s/Orlando Bustos
Name: Orlando Bustos
Title:   VP Corporate Development

Date:  October  10, 2019
/s/Javier Franco
Name: Javier Franco
Title:   VP Agriculture

Date:  October  10, 2019
/s/Stan Bharti
Name: Stan Bharti
Title:   Executive Chairman

Date:  October  10, 2019
/s/Frederic Leigh
Name: Frederic Leigh
Title:   Director

Date:  October  10, 2019
/s/William Steers
Name: William Steers
Title:   Director
Date:  October  10, 2019






59















BY-LAW NO. 1
A by-law relating generally to
the conduct of the affairs of
FLORA GROWTH CORP.
CONTENTS
1.
Interpretation
2.
Business of the Corporation
3.
Directors
4.
Committees
5.
Officers
6.
Protection of Directors, Officers and Others
7.
Shares
8.
Dividends and Rights
9.
Meetings of Shareholders
10.
Divisions and Departments
11.
Notices
12.
Electronic Documents
13.
Effective Date

BE IT ENACTED AND IT IS HEREBY ENACTED as a by-law of Flora Growth Corp. (the "Corporation") as follows:
SECTION ONE

INTERPRETATION
1.01
Definitions
In the by-laws of the Corporation, unless the context otherwise requires:
(1)
"Act" means the Business Corporations Act, R.S.0. 1990 c. B. 16 and the regulations under the Act, as from time to time amended, and every statute that may be substituted therefor and, in the case of such substitution, any reference in the by-laws of the Corporation to provisions of the Act shall be read as references to the substituted provisions therefor in the new statute or statutes;
(2)
"appoint" includes "elect" and vice versa;
(3)
"articles" means the articles of the Corporation as from time to time amended or restated;
(4)
"board" means the board of directors of the Corporation;
1

(5)
"by-laws" means this by-law and all other by-laws of the Corporation from time to time in force and effect;
(6)
"meeting of shareholders" includes an annual meeting of shareholders and a special meeting of shareholders; "special meeting of shareholders" includes a meeting of any class or classes of shareholders and a special meeting of all shareholders entitled to vote at an annual meeting of shareholders;
(7)
"non-business day" means Saturday, Sunday and any other day that is a holiday as defined in the Interpretation Act (Ontario);
(8)
"recorded address" means in the case of a shareholder his address as recorded in the securities register; and in the case of joint shareholders the address appearing in the securities register in respect of such joint holding or the first address so appearing if there is more than one; and in the case of a director, officer, auditor or member of a committee of the board his latest address as recorded in the records of the Corporation;
(9)
"Securities Transfer Act" means the Securities Transfer Act (Ontario) 2006, c.8. as amended from time to time;
(10)
"signing officer" means, in relation to any instrument, any person authorized to sign the same on behalf of the Corporation by paragraph 2.04 or by a resolution passed pursuant thereto;
(11)
all terms contained in the by-laws that are not otherwise defined in the by-laws and which are defined in the Act, such as "resident Canadian", shall have the meanings given to such terms in the Act;
(12)
the headings used in the by-laws are inserted for reference purposes only and are not be considered or taken into account in construing the terms of provisions thereof or to be deemed in any way to clarify, modify or explain the effect of any such terms or provisions; and
(13)
the singular shall include the plural and the plural shall include the singular; the masculine shall include the feminine and neuter genders; and the word "person" shall include individuals, bodies corporate, corporations, companies, partnerships, syndicates, trusts, unincorporated organizations and any number or aggregate of persons.
1.02
Conflict with Laws
In the event of any inconsistency between the by-laws and mandatory provisions of the Act or the Securities Transfer Act, the provisions of the Act or the Securities Transfer Act, as applicable, shall prevail.
2

SECTION TWO


BUSINESS OF THE CORPORATION
2.01
Registered Office
The registered office of the Corporation shall be in the place designated as in the articles or by a special resolution in accordance with the provisions of the Act; the address of the registered office within such place may be changed from time to time by the directors.
2.02
Corporate Seal
The Corporation may, but need not, adopt a corporate seal and if one is adopted it shall be in such form as the directors may by resolution adopt from time to time.
2.03
Financial Year
The financial year of the Corporation shall be as determined by the board from time to time.
2.04
Execution of Instruments
Contracts, documents or instruments in writing requiring the signature of the Corporation may be signed on behalf of the Corporation by any officer or director and instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality.  The board shall have power from time to time by resolution to appoint any officer or officers or any person or persons or any legal entity on behalf of the Corporation either to sign contracts, documents and instruments in writing generally or to sign specific contracts, documents or instruments in writing.
The seal of the Corporation, if any, may when required be affixed to contracts, documents and instruments in writing signed as set out above or by any officer or officers, person or persons, appointed as set out above by resolution of the board.
The term "contracts, documents or instruments in writing" as used in this by-law shall include deeds, mortgages, hypothecs, charges, conveyances, transfers and assignments of property, real or personal, movable or immovable, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of shares, share warrants, stocks, bonds, debentures, notes or other securities and all paper writings.
The signature or signatures of the Chairman of the Board (if any), the Vice-Chairman of the Board, the President, the Chief Executive Officer, any Executive Vice-President, any Vice-President, the Secretary, the Treasurer, an Assistant Secretary, an Assistant Treasurer or any director of the Corporation and/or any other officer or officers, person or persons, appointed as aforesaid by resolution of the board may, if specifically authorized by resolution of the directors, be printed, engraved, lithographed or otherwise mechanically or electronically reproduced upon any contracts, documents or instruments in writing or bonds, debentures, notes or other securities of the Corporation executed or issued by or on behalf of the Corporation and all contracts, documents or instruments in writing
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or bonds, debentures, notes or other securities of the Corporation on which the signature or signatures of any of the foregoing officers or directors or persons authorized as aforesaid shall be so reproduced pursuant to special authorization by resolution of the board, shall be deemed to have been manually signed by such officers or directors or persons whose signature or signatures is or are so reproduced and shall be as valid to all intents and purposes as if they had been signed manually and notwithstanding that the officers or directors or persons whose signature or signatures is or are so reproduced may have ceased to hold office at the date of the delivery or issue of such contracts, documents or instruments in writing or bonds, debentures, notes or other securities of the Corporation.
2.05
Banking Arrangements
The banking business of the Corporation, or any part thereof, including, without limitation, the borrowing of money and the giving of security therefor, shall be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or under the authority of the board.  Such banking business or any part thereof shall be transacted under such agreements, instructions and delegations of powers as the board may from time to time by resolution prescribe or authorize.
2.06
Custody of Securities
All shares and securities owned by the Corporation shall be lodged (in the name of the Corporation) with a chartered bank or a trust company or in a safety deposit box or, if so authorized by resolution of the board, with such other depositaries or in such other manner as may be determined from time to time by resolution of the board.
All share certificates, bonds, debentures, notes or other obligations or securities belonging to the Corporation may be issued or held in the name of a nominee or nominees of the Corporation (and if issued or held in the names of more than one nominee shall be held in the names of the nominees jointly with the right of survivorship) and shall be endorsed in blank with endorsement guaranteed in order to enable transfer to be completed and registration to be effected.
2.07
Voting Shares and Securities in other Companies
All of the shares or other securities carrying voting rights of any other body corporate held from time to time by the Corporation may be voted at any and all meetings of shareholders, bondholders, debenture holders or holders of other securities (as the case may be) of such other body corporate and in such manner and by such person or persons as the board shall from time to time by resolution determine.  The proper signing officers of the Corporation may also from time to time execute and deliver for and on behalf of the Corporation proxies and/or arrange for the issuance of voting certificates and/or other evidence of the right to vote in such names as they may determine without the necessity of a resolution or other action by the board.
SECTION THREE


DIRECTORS
3.01
Number of Directors and Quorum
The number of directors of the Corporation shall be the number of directors as specified in the articles or, where a minimum and maximum number of directors is provided for in the articles, the number of directors of the Corporation shall be the number of directors determined from time to time in accordance with any unanimous shareholders agreement governing the Corporation and by special resolution or, if a special resolution empowers the directors to determine the number, the number of directors determined by resolution of the board. Subject to the Act, the quorum for the transaction of business at any meeting of the board shall be a majority of the number of directors then in office and or such greater number of directors as may be required pursuant to any unanimous shareholders’ agreement governing the Corporation, provided that if the Corporation has fewer than three directors, all directors must be present at any meeting of the board to constitute a quorum.
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3.02
Qualification
No person shall be qualified for election as a director if disqualified in accordance with the Act (which would currently include: a person who is less than 18 years of age; a person who has been found to be incapable of managing property or who has been found to be incapable by a court in Canada or elsewhere; a person who is not an individual; a person guilty of prescribed offences; or a person who has the status of a bankrupt).  A director need not be a shareholder.  The board shall be comprised of the number of Canadian residents as may be prescribed from time to time by the Act.
3.03
Election and Term
The election of directors shall take place at the first meeting of shareholders and at each succeeding annual meeting of shareholders and all the directors then in office shall retire but, if qualified, shall be eligible for re-election.  The number of directors to be elected at any such meeting shall be the number of directors as specified in the articles or, if a minimum and maximum number of directors is provided for in the articles, the number of directors determined in accordance with any unanimous shareholders agreement governing the Corporation and by special resolution or, if the special resolution empowers the directors to determine the number, the number of directors determined by resolution of the board.  The voting on the election shall be by show of hands unless a ballot is demanded by any shareholder.  If an election of directors is not held at the proper time, the incumbent directors shall continue in office until their successors are elected.
3.04
Removal of Directors
Subject to the provisions of the Act and any unanimous shareholders governing the Corporation, the shareholders may by ordinary resolution passed at a meeting specially called for such purpose remove any director from office and the vacancy created by such removal may be filled at the same meeting failing which it may be filled by a quorum of the directors.
3.05
Vacation of Office
A director ceases to hold office when he dies or, subject to the Act, resigns; he is removed from office by the shareholders in accordance with the Act; he becomes of unsound mind and is so found by a court in Canada or elsewhere or if he acquires the status of a bankrupt.
3.06
Vacancies
Subject to the Act and in accordance with any unanimous shareholders agreement governing the Corporation, a quorum of the board may fill a vacancy in the board, except a vacancy resulting from an increase in the number or maximum number of directors or from a failure of the shareholders to elect the number of directors required to be elected at any meeting of shareholders.
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3.07
Action by the Board
The board shall manage or supervise the management of the business and affairs of the Corporation.  Subject to paragraph 3.08 and subject to any unanimous shareholders agreement governing the Corporation, the powers of the board may be exercised at a meeting at which a quorum is present or by resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of the board.  Where there is a vacancy in the board, the remaining directors may exercise all the powers of the board so long as a quorum of the board remains in office.
3.08
Electronic Participation
Subject to the Act, if all of the directors consent, a director may participate in a meeting of the board or a committee of the board by means of such telephonic, electronic or other communications facilities as permit all persons participating in the meeting to communicate adequately with each other, and a director participating in a meeting by such means shall be deemed to be present at that meeting.  A consent is effective whether given before or after the meeting and may be given with respect to all meetings of the board and committees of the board.
3.09
Place of Meetings
Meetings of the board may be held at any place within or outside Ontario.  In any financial year of the Corporation a majority of the meetings of the board need not be held within Canada.
3.10
Calling of Meetings
Subject to the Act and in accordance with the provisions of any unanimous shareholders agreement governing the Corporation, meetings of the board shall be held from time to time on such day and at such time and at such place as the board, the Chairman of the Board (if any), the President, an Executive Vice-President or a Vice-President who is a director or any one director may determine and the Secretary or Assistant Secretary, when directed by the board, the Chairman of the Board (if any), the President, an Executive Vice-President or a Vice-President who is a director or any one director shall convene a meeting of the board.
3.11
Notice of Meeting
Notice of the date, time and place of each meeting of the board shall be given in the manner provided in paragraph 11.01 to each director not less than 48 hours (exclusive of any part of a non-business day) before the time when the meeting is to be held.  A notice of a meeting of directors need not specify the purpose of or the business to be transacted at the meeting except where the Act requires such purpose or business to be specified.
A director may in any manner waive notice of or otherwise consent to a meeting of the board.
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3.12
First Meeting of New Board
Provided a quorum of directors is present, each newly elected board may without notice hold its first meeting immediately following the meeting of shareholders at which such board is elected.
3.13
Adjourned Meeting
Notice of an adjourned meeting of the board is not required if the time and place of the adjourned meeting is announced at the original meeting.
3.14
Regular Meetings
The board may appoint a day or days in any month or months for regular meetings of the board at a place and hour to be named.  A copy of a schedule of regular meetings of the board setting forth the proposed dates, times and places of such regular meetings shall be sent to each director at the commencement of each calendar year, however, each director shall also be provided with a follow-up notice of meeting and agenda prior to each regularly scheduled meeting.
3.15
Chairman
The chairman of any meeting of the board shall be the first mentioned of such of the following officers as have been appointed and who is a director and is present at the meeting: the Chairman of the Board, the President, an Executive Vice-President or a Vice-President.  If no such officer is present, the directors present shall choose one of their number to be chairman.
3.16
Votes to Govern
Subject to the provisions of any unanimous shareholders agreement governing the Corporation, at all meetings of the board every question shall be decided by a majority of the votes cast on the question.  In case of an equality of votes, the chairman of the meeting shall not be entitled to a second or casting vote.
3.17
Conflict of Interest
A director or officer who is a party to, or who is a director or officer of or has a material interest in any person who is a party to, a material contract or transaction or proposed material contract or transaction with the Corporation shall disclose in writing to the Corporation or request to have entered in the minutes of the meetings of the directors the nature and extent of his interest at the time and in the manner provided by the Act.  Any such contract or transaction or proposed contract or transaction shall be referred to the board or shareholders for approval even if such contract is one that in the ordinary course of the Corporation's business would not require approval by the board or shareholders, and a director interested in a contract or transaction so referred to the board shall not attend any part of a meeting of the board during which the contract or transaction is discussed and shall not vote on any resolution to approve the same except as permitted by the Act.  If no quorum exists for the purpose of voting on a resolution to approve a contract or transaction only because a director is not permitted to be present at the meeting by reason of this section, the remaining directors shall be deemed to constitute a quorum for the purposes of voting on the resolution.  Where all of the directors are required to disclose their interests pursuant to this section, the contract or transaction may be approved only by the shareholders.
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3.18
Remuneration and Expenses
The directors shall be paid such remuneration for their services as the board may from time to time determine.  The directors shall also be entitled to be reimbursed for traveling and other expenses properly incurred by them in attending meetings of the shareholders or of the board or any committee thereof or otherwise in the performance of their duties.  Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor.
SECTION FOUR


COMMITTEES
4.01
Committee of Directors
The board may appoint a committee of directors, however designated, and delegate to such committee any of the powers of the board except those which pertain to items which, under the Act or any unanimous shareholder agreement governing the Corporation, a committee of directors has no authority to exercise.
4.02
Transaction of Business
The powers of a committee of directors may be exercised by a meeting at which a quorum is present or by resolution in writing signed by all members of such committee who would have been entitled to vote on that resolution at a meeting of the committee.  Meetings of such committee may be held at any place within or outside Ontario.

4.03      Procedure    Pro

Unless otherwise determined by the board, each committee shall have power to fix its quorum at not less than a majority of its members, to elect its chairman and to regulate its procedure.
SECTION FIVE


OFFICERS
5.01
Appointment
Subject to the provisions of any unanimous shareholder agreement governing the Corporation, the board may from time to time appoint a Chairman of the Board, a President, one or more Vice-Presidents (to which title may be added words indicating seniority or function), a Secretary, a Treasurer and such other officers as the board may determine, including one or more assistants to any of the officers so appointed.  The board may specify the duties of and, in accordance with this by-law and subject to the provisions of the Act and any unanimous shareholders agreement governing the Corporation, delegate to such officers powers to manage the business and affairs of the Corporation.  Subject to paragraph 5.02, an officer may but need not be a director and one person may hold more than one office.  In case and whenever the same person holds the offices of Secretary and Treasurer, he may but need not be known as the Secretary-Treasurer.
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All officers shall sign such contracts, documents, or instruments in writing as require their respective signatures.  In the case of the absence or inability to act of any officer or for any other reason that the board may deem sufficient, the board may delegate all or any of the powers of such officer to any other officer or to any director for the time being.
5.02
Chairman of the Board
The Chairman of the Board, if appointed, shall be a director and shall, when present, preside at all meetings of the board.  The Chairman of the Board shall be vested with and may exercise such powers and shall perform such other duties as may from time to time be assigned to him by the board.  During the absence or disability of the Chairman of the Board, his duties shall be performed and his powers exercised by a director identified by the Board.
5.03
President
The President, subject to the authority of the board, shall have general supervision of the business and affairs of the Corporation and such other powers and duties as the board may specify.
5.04
Executive Vice-President or Vice-President
Each Executive Vice-President or Vice-President shall have such powers and duties as the board or the President may specify.  The Executive Vice-President or Vice-President or, if more than one, the Executive Vice-President or Vice-President designated from time to time by the board or by the President, shall be vested with all the powers and shall perform all the duties of the President in the absence or inability or refusal to act of the President.
5.05
Secretary or Assistant Secretary
The Secretary or Assistant Secretary shall give or cause to be given as and when instructed, all notices to shareholders, directors, officers, auditors and members of committees of the board; he shall be the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Corporation and all books, papers, records, documents and instruments belonging to the Corporation, except when some other officer or agent has been appointed for that purpose; and he shall have such other powers and duties as the board may specify.

5.06      Treasurer or Assistant Treasurer    Pro


The Treasurer or Assistant Treasurer shall keep proper accounting records in compliance with the Act and shall be responsible for the deposit of money, the safekeeping of securities and the disbursement of the funds of the Corporation; he shall render to the board whenever required an account of all his transactions as Treasurer or Assistant Treasurer and of the financial position of the Corporation; and he shall have such other powers and duties as the board may specify.  Unless and until the board designates any other officer of the Corporation to be the Chief Financial Officer of the Corporation, the Treasurer or Assistant Treasurer shall be the Chief Financial Officer of the Corporation.
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5.07
Powers and Duties of Other Officers
The powers and duties of all other officers shall be such as the terms of their engagement call for or as the board may specify.  Any of the powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless the board otherwise directs.
5.08
Variation of Powers and Duties
The board may from time to time and subject to the provisions of the Act, vary, add to or limit the powers and duties of any officer.
5.09
Term of Office
The board, in its discretion, may remove any officer of the Corporation, with or without cause, without prejudice to such officer's rights under any employment contract.  Otherwise each officer appointed by the board shall hold office until his successor is appointed or until the earlier of his resignation or death.
5.10
Terms of Employment and Remuneration
The terms of employment and the remuneration of an officer appointed by the board shall be settled by it from time to time.  The fact that any officer or employee is a director or shareholder of the Corporation shall not disqualify him from receiving such remuneration as may be so determined.
5.11
Conflict of Interest
An officer shall disclose his interest in any material contract or transaction or proposed material contract or transaction with the Corporation in accordance with paragraph 3.17.
5.12
Agents and Attorneys
The board shall have power from time to time to appoint agents or attorneys for the Corporation in or outside Canada with such powers of management or otherwise (including the powers to subdelegate) as may be thought fit.
SECTION SIX

PROTECTION OF
DIRECTORS, OFFICERS AND OTHERS
6.01
Submission of Contracts or Transactions to Shareholders for Approval
The board in its discretion may submit any contract, act or transaction for approval, ratification or confirmation at any meeting of the shareholders called for the purpose of considering the same and any contract, act or transaction that shall be approved, ratified or confirmed by a resolution passed by a majority of the votes cast at any such meeting (unless any different or additional requirement is imposed by the Act or by the Corporation's articles or any other by-law) shall be as valid and as binding upon the Corporation and upon all the shareholders as though it had been approved, ratified or confirmed by every shareholder of the Corporation.
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6.02
For the Protection of Directors and Officers
In supplement of and not by way of limitation upon any rights conferred upon directors by the provisions of the Act, it is declared that no director shall be disqualified by his office from, or vacate his office by reason of, holding any office or place of profit under the Corporation or under any body corporate in which the Corporation shall be a shareholder or by reason of being otherwise in any way directly or indirectly interested or contracting with the Corporation either as vendor, purchaser or otherwise or being concerned in any contract or arrangement made or proposed to be entered into with the Corporation in which he is in any way directly or indirectly interested either as vendor, purchaser or otherwise nor shall any director be liable to account to the Corporation or any of its shareholders or creditors for any profit arising from any such office or place of profit; and, subject to the provisions of the Act, no contract or arrangement entered into by or on behalf of the Corporation in which any director shall be in any way directly or indirectly interested shall be avoided or voidable and no director shall be liable to account to the Corporation or any of its shareholders or creditors for any profit realized by or from any such contract or arrangement by reason of the fiduciary relationship existing or established thereby.  Subject to the provisions of the Act and to paragraph 3.17, no director shall be obliged to make any declaration of interest or refrain from voting in respect of a contract or proposed contract with the Corporation in which such director is in any way directly or indirectly interested.
6.03
Limitation of Liability
Except as otherwise provided in the Act, no director or officer for the time being of the Corporation shall be liable for the acts, receipts, neglects or defaults of any other director or officer or employee or for joining in any receipt or act for conformity or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by the Corporation or for or on behalf of the Corporation or for the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to the Corporation shall be placed out or invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any persons, firm or corporation including any person, firm or corporation with whom or which any moneys, securities or effects shall be lodged or deposited for any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to the Corporation or for any other loss, damage or misfortune whatever which may happen in the execution of the duties of his respective office or trust or in relation thereto unless the same shall happen by or through his failure to exercise the powers and to discharge the duties of his office honestly, in good faith and in the best interests of the Corporation and in connection therewith to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.  The directors for the time being of the Corporation shall not be under any duty or responsibility in respect of any contract, act or transaction whether or not made, done or entered into in the name or on behalf of the Corporation, except such as shall have been submitted to and authorized or approved by the board.  If any director or officer of the Corporation shall be employed by or shall perform services for the Corporation otherwise than as a director or officer or shall be a member of a firm or a shareholder, director or officer of a company which is employed by or performs services for the Corporation, the fact of his being a director or officer of the Corporation shall not disentitle such director or officer or such firm or company, as the case may be, from receiving proper remuneration for such services.
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6.04
Indemnity
a)
Subject to the provisions of paragraph (b) below, the Corporation shall, to the maximum extent permitted by law, indemnify a director or officer of the Corporation, a former director or officer of the Corporation, or another individual who acts or acted at the Corporation's request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Corporation or other entity.
b)
The indemnity provided under paragraph (a) above will only be applicable if the individual:
i.
acted honestly and in good faith with a view to the best interests of the Corporation or other entity for which the individual acted as director or officer or in a similar capacity at the Corporation's request, as the case may be;
ii.
in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that the individual's conduct was lawful; and
iii.
was not judged by a court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done.
c)
The Corporation shall advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in paragraph (a), provided that such individual shall repay the moneys so advanced if the individual does not fulfill the conditions of paragraph (b).
d)
The provisions for indemnification contained in this by-law shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any agreement, vote of shareholders or directors or otherwise, both as to action in the individual's official capacity and as to action in another capacity, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs and legal representatives of such a person.
6.05
Insurance
The Corporation may purchase and maintain insurance for the benefit of any person referred to in paragraph 6.04 against such liabilities and in such amounts as the board may from time to time determine and are permitted by the Act.
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SECTION SEVEN

SHARES
7.01
Allotment
Subject to the provisions of any unanimous shareholders agreement, the board may from time to time allot or grant options to purchase the whole or any part of the authorized and unissued shares of the Corporation at such times and to such persons and for such consideration as the board shall determine, provided that no share shall be issued until it is fully paid as provided by the Act.  Shares may be issued as uncertificated securities or be represented by share certificates in accordance with the provisions of the Act and the Securities Transfer Act.
7.02
Commissions
Subject to the provisions of any unanimous shareholders agreement, the board may from time to time authorize the Corporation to pay a reasonable commission to any person in consideration of such person purchasing or agreeing to purchase shares of the Corporation, whether from the Corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares.
7.03
Registration of Transfers
All transfers of securities of the Corporation shall be made in accordance with the Act and the Securities Transfer Act.  Subject to the provisions of the Act and the Securities Transfer Act, no transfer of shares represented by a security certificate (as defined in the Act) shall be registered in a securities register except upon presentation of the certificate representing such shares with an endorsement which complies with the Act and the Securities Transfer Act made thereon or delivered therewith duly executed by an appropriate person as provided by the Act and the Securities Transfer Act, together with such reasonable assurance that the endorsement is genuine and effective as the board may from time to time prescribe, upon payment of all applicable taxes and any fees prescribed by the board, upon compliance with such restrictions on transfer as are authorized by the articles and upon satisfaction of any lien referred to in paragraph 7.05.
7.04
Transfer Agents and Registrars
The board may from time to time appoint one or more agents to maintain, in respect of each class of securities of the Corporation issued by it in registered form, a securities register and one or more branch securities registers.  Such a person may be designated as transfer agent and registrar according to his functions and one person may be designated both registrar and transfer agent.  The board may at any time terminate such appointment.
7.05
Lien for Indebtedness
The Corporation shall have a lien on any share registered in the name of a shareholder or his legal representatives for a debt of that shareholder to the Corporation, provided that if the shares of the Corporation are listed on a stock exchange in or outside Canada, the Corporation shall not have such lien.  The Corporation may enforce any lien that it has on shares registered in the name of a shareholder indebted to the Corporation by the sale of the shares thereby affected or by any other action, suit, remedy or proceeding authorized or permitted by law and, pending such enforcement, the Corporation may refuse to register a transfer of the whole or any part of such shares.
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7.06
Non-recognition of Trusts
Subject to the provisions of the Act and the Securities Transfer Act, the Corporation may treat as absolute owner of any share the person in whose name the share is registered in the securities register as if that person had full legal capacity and authority to exercise all rights of ownership, irrespective of any indication to the contrary through knowledge or notice or description in the Corporation's records or on the share certificate.
7.07
Share Certificates and Written Evidence of Ownership
Every holder of one or more shares of the Corporation that are certificated securities under the Act shall be entitled, at his option, to a share certificate, or to a non-transferable written acknowledgement of his right to obtain a share certificate, stating the number and class or series of shares held by him as shown on the securities register.  Share certificates and acknowledgements of a shareholder's right to a share certificate, respectively, shall be in such form as the board shall from time to time approve.  Any share certificate shall be signed in accordance with paragraph 2.04 and need not be under the corporate seal; provided that, unless the board otherwise determines, certificates representing shares in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar.  The signature of one of the signing officers or, in the case of share certificates which are not valid unless countersigned by or on behalf of a transfer agent and/or registrar, the signatures of both signing officers, may be printed or mechanically reproduced in facsimile upon share certificates and every such facsimile signature shall for all purposes be deemed to be the signature of the officer whose signature it reproduces and shall be binding upon the Corporation.  A share certificate executed as aforesaid shall be valid notwithstanding that one or both of the officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate.  Holders of uncertificated securities of the Corporation shall be entitled to receive a written notice or other documentation as provided by the Act.
7.08
Replacement of Share Certificates
The board or any officer or agent designated by the board may in its or his discretion direct the issue of a new share certificate in lieu of and upon cancellation of a share certificate that has been mutilated or in substitution for a share certificate claimed to have been lost, destroyed or wrongfully taken on payment of such fee, not exceeding $3.00, and on such terms as to indemnity, reimbursement of expenses and evidence of loss and of title as the board may from time to time prescribe, whether generally or in any particular case.
7.09
Joint Shareholders
If two or more persons are registered as joint holders of any share, the Corporation shall not be bound to issue more than one certificate in respect thereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them.  Any one of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such shares.
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7.10
Deceased Shareholders
In the event of the death of a holder, or of one of the joint holders, of any share, the Corporation shall not be required to make any entry in the securities register in respect thereof or to make payment of any dividends thereon except upon production of all such documents as may be required by law and upon compliance with the reasonable requirements of the Corporation and its transfer agents.
SECTION EIGHT

DIVIDENDS AND RIGHTS
8.01
Dividends
Subject to the provisions of the Act and any unanimous shareholder agreement governing the Corporation, the board may from time to time declare dividends payable to the shareholders according to their respective rights and interest in the Corporation.  Dividends may be paid in money or property or by issuing fully paid shares of the Corporation.
8.02
Dividend Cheques
A dividend payable in cash shall be paid either electronically by direct deposit or by cheque drawn on the Corporation's bankers or one of them to the order of each registered holder of shares of the class or series in respect of which it has been declared and, if paid by cheque, mailed by prepaid ordinary mail to such registered holder at his recorded address, unless such holder otherwise directs.  In the case of joint holders any cheque issued shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at their recorded address.  The mailing of such cheque as set out in this section, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold.
8.03
Non-receipt of Cheques
In the event of non-receipt of any dividend cheque by the person to whom it is sent as set out in section 8.02, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as the board may from time to time prescribe, whether generally or in any particular case.
8.04
Record Date for Dividends and Rights
The board may fix in advance a date, preceding by not more than 50 days the date for the payment of any dividend or the date for the issue of any warrant or other evidence of the right to subscribe for securities of the Corporation, as a record date for the determination of the persons entitled to receive payment of such dividend or to exercise the right to subscribe for such securities, and notice of any such record date shall be given not less than seven days before such record date in the manner provided by the Act.  If no record date is so fixed, the record date for the determination of the persons entitled to receive payment of any dividend or to exercise the right to subscribe for securities of the Corporation shall be at the close of business on the day on which the resolution relating to such dividend or right to subscribe is passed by the board.
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8.05
Unclaimed Dividends
Any dividend unclaimed after a period of six years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation.
SECTION NINE

MEETINGS OF SHAREHOLDERS
9.01
Annual Meetings
The annual meeting of shareholders shall be held at such time in each year as the board, the Chairman of the Board (if any) or the President may from time to time determine provided such determination is made in accordance with any unanimous shareholder agreement governing the Corporation, in any event no later than the earlier of (i) six months after the end of each of the Corporation's financial years, and (ii) fifteen months after the Corporation's last annual meeting of shareholders, for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing directors, appointing an auditor and for the transaction of such other business as may properly be brought before the meeting.
9.02
Special Meetings
The Board shall have the power to call a special meeting of shareholders at any time.
9.03
Place of Meetings
Subject to the Corporation's articles, a meeting of shareholders of the Corporation shall be held at such place in or outside of Ontario as the board may determine or, in the absence of such a determination, at the place where the registered office of the Corporation is located.  If the Corporation makes available a telephonic, electronic or other communication facility that permits all participants of a shareholders meeting to communicate adequately with each other during the meeting and otherwise complies with the Act, any person entitled to attend such meeting may participate by means of such communication facility in the manner prescribed by the Act, and any person participating in the meeting by such means is deemed to be present at the meeting.
9.04
Notice of Meetings
Notice of the time and place of each meeting of shareholders shall be given in the manner provided in paragraph 11.01 not less than ten days unless the Corporation is an offering Corporation, in which case not less than 21 days, and in each case no more than 50 days before the date of the meeting to each director, to the auditor and to each shareholder who at the close of business on the record date for notice is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting.  Notice of a meeting of shareholders called for any purpose other than consideration of the financial statements and auditor's report, election of directors and reappointment of the incumbent auditor shall state or be accompanied by a statement of the nature of such business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and the text of any special resolution or by-law to be submitted to the meeting.  A shareholder and any other person entitled to attend a meeting of shareholders may in any manner waive notice of or otherwise consent to a meeting of shareholders.
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9.05
List of Shareholders Entitled to Notice
For every meeting of shareholders, the Corporation shall prepare a list of shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of shares held by each shareholder entitled to vote at the meeting.  If a record date for the meeting is fixed pursuant to paragraph 9.06, the list of shareholders entitled to receive notice of the meeting shall be prepared not later than ten Business Days after such record date.  If no record date is fixed, the list of shareholders entitled to receive notice of the meeting shall be prepared as of the close of business on the day immediately preceding the day on which notice of the meeting is given, or where no such notice is given, on the day on which the meeting is held.  The list shall be available for examination by any shareholder during usual business hours at the registered office of the Corporation or at the place where the central securities register is maintained and at the meeting of shareholders for which the list was prepared.
9.06
Record Date for Notice
The board may fix in advance a date, preceding the date of any meeting of shareholders by not more than 60 days and not less than 30 days (or pursuant to the time limitations as may be prescribed by the Act from time to time), as a record date for the determination of the shareholders entitled to receive notice of the meeting, provided that notice of any such record date shall be given not less than seven days before such record date by newspaper advertisement in the manner provided in the Act and, if any shares of the Corporation are listed for trading on a stock exchange in Canada, by written notice to each such stock exchange.  If no record date is so fixed, the record date for the determination of the shareholders entitled to receive notice of the meeting shall be at the close of business on the day immediately preceding the day on which the notice is given or, if no notice is given, the day on which the meeting is held.
9.07
Meetings Held by Electronic Means
If the directors or shareholders of the Corporation call a meeting of shareholders pursuant to the Act, the directors may determine that the meeting shall be held, in accordance with the Act, entirely by means of a telephonic, electronic or other communications facility that permits all participants to communicate adequately with each other during the meeting, provided the Corporation makes provision for electronic voting at such meeting in accordance with the Act and section 9.19. Any person who participates in a meeting through those means shall be deemed for the purposes of the Act to be present in person at such meeting.
9.08
Meetings without Notice
A meeting of shareholders may be held without notice at any time and place permitted by the Act
(a)
if all the shareholders entitled to vote thereat are present in person or represented by proxy waive notice of or otherwise consent to such meeting being held, and
(b)
if the auditor and the directors are present or waive notice of or otherwise consent to such meeting being held, so long as such shareholders, auditor and directors present are not attending for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.  At such a meeting any business may be transacted which the Corporation at a meeting of shareholders may transact.  If the meeting is held at a place outside Canada, shareholders not present or represented by proxy, but who have waived notice of or otherwise consented to such meeting, shall also be deemed to have consented to the meeting being held at such place.
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9.09
Chairman, Secretary and Scrutineers
The Chairman of the Board or any other director or officer of the Corporation, as determined by the board, may act as chairman of any meeting of shareholders.  If no such director or officer is present within 15 minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to be chairman.  If the Secretary or Assistant Secretary of the Corporation is absent, the chairman shall appoint some person, who need not be a shareholder, to act as secretary of the meeting.  If desired, one or more scrutineers, who need not be shareholders, may be appointed by a resolution or by the chairman with the consent of the meeting.
9.10
Persons Entitled to be Present
The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors and the auditor of the Corporation and others who, although not entitled to vote are entitled or required under any provision of the Act or the articles or the by-laws to be present at the meeting.  Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting.
9.11
Quorum
Subject to the Act and any minimum quorum requirement for a shareholder meeting of any securities exchange upon which the Corporation’s shares are listed, the holders of not less than 10% of the shares entitled to vote at a meeting of shareholders, present in person or represented by proxy, shall constitute a quorum.  If a quorum is present at the opening of any meeting of shareholders, the shareholders present or represented by proxy may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the opening of any meeting of shareholders, the shareholders present or represented by proxy may adjourn the meeting to a fixed time and place but may not transact any other business.  Subject to the Act, where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to vote on that matter and, in all matters other than the election of directors, the affirmative vote of the majority of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act of such class or series or classes or series.
9.12
Right to Vote
Subject to the provisions of the Act as to authorized representatives of any other body corporate or association, at any meeting of shareholders for which the Corporation has prepared the list referred to in section 9.05, every person who is named in such list shall be entitled to vote the shares shown thereon
18

opposite that person’s name at the meeting to which such list relates except to the extent that, wherethe Corporation has fixed a record date in respect of such meeting pursuant to section 9.06, such person has transferred any shares after such record date and the transferee, having produced properly endorsed certificates evidencing such shares or having otherwise established ownership of such shares, has demanded not later than 10 days before the meeting that the transferee’s name be included in such list. In any such case, the transferee shall be entitled to vote the transferred shares at the meeting. At any meeting of shareholders for which the Corporation has not prepared the list referred to in section 9.05, every person shall be entitled to vote at the meeting who at the time of the commencement of the meeting is entered in the securities register as the holder of one or more shares carrying the right to vote at such meeting.
9.13
Proxies
Every shareholder entitled to vote at a meeting of shareholders may appoint a proxyholder, or one or more alternate proxyholders, who need not be shareholders, to attend and act at the meeting in the manner and to the extent authorized and with the authority conferred by the proxy.  A proxy shall be in writing executed by the shareholder or his attorney authorized in writing (or by electronic signature) and shall conform with the requirements of the Act.
9.14
Time for Deposit of Proxies
The board may by resolution specify in a notice calling a meeting of shareholders a time, preceding the time of such meeting or an adjournment thereof by not more than 48 hours exclusive of any part of a non-business day, before which time proxies to be used at such meeting must be deposited.  A proxy shall be acted upon only if, prior to the time so specified, it shall have been deposited with the Corporation or an agent thereof specified in such notice or, if no such time is specified in such notice, only if it has been received by the Secretary of the Corporation or by the chairman of the meeting or any adjournment thereof prior to the time of voting.
9.15
Joint Shareholders
If two or more persons hold shares jointly, any one of them present in person or represented by proxy at a meeting of shareholders may, in the absence of the other or others, vote the shares; but if two or more of those persons are present in person or represented by proxy and vote, they shall vote as one the shares jointly held by them.
9.16
Votes to Govern
At any meeting of shareholders every question shall, unless otherwise required by the articles or by-laws or by law or any unanimous shareholders agreement governing the Corporation, be determined by a majority of the votes cast on the question.  In case of an equality of votes either upon a show of hands or upon a poll, the chairman of the meeting shall not be entitled to a second or casting vote.
9.17
Show of Hands
Subject to the provisions of the Act, any question at a meeting of shareholders shall be decided by a show of hands unless a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands, every person who is present and entitled to vote shall have one vote. Whenever a vote by show of hands shall have been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the chairperson of the meeting that the vote upon the question has been carried, carried by a particular majority or defeated and an entry to that effect in the minutes of the meeting shall be prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect of the question, and the result of the vote so taken shall be the decision of the shareholders upon the question.
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9.18
Ballots
On any question proposed for consideration at a meeting of shareholders, and whether or not a show of hands has been taken thereon, the chairperson of the meeting or any person who is present and entitled to vote, whether as shareholder, proxyholder or representative, on such questions at the meeting may demand a ballot. A ballot so required or demanded shall be taken in such manner as the chairperson of the meeting shall direct. A requirement or demand for a ballot may be withdrawn at any time prior to the taking of the ballot. If a ballot is taken, each person present shall be entitled, in respect of the shares which such person is entitled to vote at the meeting upon the question, to that number of votes provided by the Act or the articles, and the result of the ballot so taken shall be the decision of the shareholders upon the said question.
9.19
Electronic Voting
Any vote referred to in sections 9.17 and 9.18 may be held entirely by means of a telephonic, electronic or other communication facility if the Corporation makes available such a communication facility; provided the facility enables the votes to be gathered in a manner that permits their subsequent verification.
9.20
Adjournment
The chairman at the meeting of shareholders may with the consent of the meeting and subject to such conditions as the meeting may decide, or where otherwise permitted under the provisions of the Act, adjourn the meeting from time to time and from place to place.  If a meeting of shareholders is adjourned for less than 30 days, it shall not be necessary to give notice of the adjourned meeting, other than by announcement at the earliest meeting that is adjourned.  If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting shall be given as for an original meeting.
9.21
Resolution in Writing
A resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders unless a written statement with respect to the subject matter of the resolution is submitted by a director or the auditor in accordance with the Act.
SECTION TEN

DIVISIONS AND DEPARTMENTS
10.01
Creation and Consolidation of Divisions
The board may cause the business and operations of the Corporation or any part thereof to be divided or to be segregated into one or more subsidiaries, partnerships or other legal entities upon such basis, including without limitation, character or type of operation, geographical territory, product manufactured or service rendered, as the board may consider appropriate in each case.  The board may also cause the business and operations of any such subsidiary, partnership or other legal entity to be further divided into subsidiaries, partnerships or other legal entities and the business and operations of any such subsidiaries, partnerships or other legal entities to be consolidated upon such basis as the board may consider appropriate in each case.
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10.02
Name of Division
Any division or its sub-units may be designated by such name as the board may from time to time determine and may transact business under such name, provided that the Corporation shall set out its name in legible characters in all contracts, invoices, negotiable instruments and orders for goods or services issued or made by or on behalf of the Corporation.
10.03
Officers of Division
From time to time the board or, if authorized by the board, the President and/or Chief Executive Officer, may appoint one or more officers for any division, prescribe their powers and duties and settle their terms of employment and remuneration.  The board or, if authorized by the board, the President and/or Chief Executive Officer, may remove at its or his pleasure any officer so appointed, without prejudice to such officer's rights under any employment contract.  Officers of divisions or their sub-units shall not, as such, be officers of the Corporation.
SECTION ELEVEN

NOTICES
11.01
Method of Giving Notices
Any notice (which term includes any communication or document) to be given (which term includes sent, delivered or served) pursuant to the Act, the regulations thereunder, the articles, the by-laws or otherwise to a shareholder, director, officer, auditor or member of a committee of the directors shall be sufficiently given if delivered personally to the person to whom it is to be given; delivered to the recorded address of the person; mailed to the person's recorded address by prepaid or ordinary or air mail; sent to the person's recorded address by any means of prepaid transmitted or recorded communication; or an electronic document is provided in accordance with Section Twelve of this by-law.
A notice delivered as set out in this section is deemed to have been given when it is delivered personally or to the recorded address; a notice mailed as set out in this section shall be deemed to have been given when deposited in a post office or public letter box; and a notice sent by means of transmitted or recorded communication as set out in this section is deemed to have been dispatched or delivered to the appropriate communication company or agency or its representative for dispatch; and a notice sent by electronic means as set out in this section and Section Twelve shall be deemed to have been given upon receipt of reasonable confirmation of transmission to the designated information system indicated by the person entitled to receive such notice. The corporate secretary may change or cause to be changed the recorded address of any shareholder, director, officer, auditor or member of a committee of the directors in accordance with any information believed by him or her to be reliable.  The Secretary or Assistant Secretary may change or cause to be changed the recorded address of any shareholder, director, officer, auditor or member of a committee of the board in accordance with any information believed by him to be reliable.
21

11.02
Signature to Notices
The signature of any director or officer of the Corporation to any notice or document to be given by the Corporation may be written, stamped, mechanically reproduced or electronically reproduced in whole or in part.
11.03
Proof of Service
With respect to every notice sent by post it is sufficient to prove that the envelope or wrapper containing the notice or other document was properly addressed as provided in this by-law and put into a post office or into a letter box.  With respect to every notice or other document sent as an electronic document it is sufficient to prove that the electronic document was properly addressed to the designated information system as provided in this by-law and sent by electronic means.  A certificate of the Chairman of the Board (if any), the President, an Executive Vice-President, a Vice-President, the Secretary, the Assistant Secretary, the Treasurer or the Assistant Treasurer or of any other officer of the Corporation in office at the time of the making of the certificate or of a transfer officer of any transfer agent or branch transfer agent of shares of any class of the Corporation as to the facts in relation to the mailing or delivery of any notice or other document to any shareholder, director, officer or auditor or publication of any notice or other document shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer or auditor of the Corporation as the case may be.
11.04
Notice to Joint Shareholders
All notices with respect to shares registered in more than one name shall, if more than one address appears on the records of the Corporation in respect of such joint holdings, be given to all of such joint shareholders at the first address so appearing, and notice so given shall be sufficient notice to the holders of such shares.
11.05
Computation of Time
In computing the date when notice must be given under any provision requiring a specified number of days’ notice of any meeting or other event both the date of giving the notice and the date of the meeting or other event shall be excluded.
11.06
Undelivered Notices
If any notice given to a shareholder pursuant to paragraph 11.01 is returned on three consecutive occasions because he cannot be found, the Corporation shall not be required to give any further notices to such shareholder until he informs the Corporation in writing of his new address.
11.07
Omissions and Errors
The accidental omission to give any notice to any shareholder, director, officer, auditor or member of a committee of the board or the non-receipt of any notice by any such person or any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting held pursuant to such notice or otherwise found thereon.
22

11.08
Deceased Shareholders
Any notice or other document delivered or sent by post or left at the address of any shareholder as the same appears in the records of the Corporation shall, notwithstanding that such shareholder be then deceased, and whether or not the Corporation has notice of his decease, be deemed to have been duly served in respect of the shares held by such shareholder (whether held solely or with any person or persons) until some other person be entered in his stead in the records of the Corporation as the holder or one of the holders thereof and such service shall for all purposes be deemed a sufficient service of such notice or document on his heirs, executors or administrators and on all persons, if any, interested with him in such shares.
11.09
Persons Entitled by Death or Operation of Law
Every person who, by operation of law, transfer, death of a shareholder or any other means whatsoever, shall become entitled to any share, shall be bound by every notice in respect of such share which shall have been duly given to the shareholder from whom he derives his title to such share prior to his name and address being entered on the securities register (whether such notice was given before or after the happening of the event upon which he became so entitled) and prior to his furnishing to the Corporation the proof of authority or evidence of his entitlement prescribed by the Act.
11.10
Waiver of Notice
Any shareholder (or his duly appointed proxyholder), director, officer, auditor or member of a committee of the board may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provision of the Act, the regulations thereunder, the articles, the by-laws or otherwise and such waiver or abridgement, whether given before or after the meeting or other event of which notice is required to be given shall cure any default in the giving or in the time of such notice, as the case may be.  Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of shareholders or of the board or of a committee of the board which may be given in any manner.
SECTION TWELVE
ELECTRONIC DOCUMENTS
12.01
Creation and Provision of Information
Unless the Corporation's articles provide otherwise, and subject to and in accordance with the Act, the Corporation may satisfy any requirement of the Act to create or provide a notice, document or other information to any person by the creation or provision of an electronic document.  Except as provided in the Act, "electronic document" means any form of representation of information or of concepts fixed in any medium in or by electronic, optical or other similar means that can be read or perceived by a person by any means.
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SECTION THIRTEEN

EFFECTIVE DATE
13.01
Effective Date
The foregoing is the complete text of By-law No. 1 of the Corporation, as adopted by the board of the Corporation on March 14, 2019.

ENACTED this 14th day of March, 2019

(signed) “Damian Lopez”
 
Chief Executive Officer
 
 

24


FLORA GROWTH CORP. SUBSCRIBER QUESTIONNAIRE
In connection with subscribing for the securities (the “Securities”) issued by Flora Growth Corp., a corporation incorporated under the laws of the Province of Ontario, Canada (the “Company”), please complete the following Subscriber Questionnaire.   The Company intends to use the proceeds of this offering for a variety of uses including without limitation working capital and general corporate purposes as further described in the offering circular pursuant to which the Securities are being offered under Regulation A (“Regulation A”) under the Securities Act of 1933 (“Securities Act”) in effect as of the date hereof (the “Offering Circular”).  The potential subscriber in the Securities shall be referred to in this Agreement as the “Subscriber.”  This Subscriber Questionnaire should be completed either by the Subscriber or, if the Subscriber is an entity, by an authorized representative of the Subscriber.
The Subscriber Questionnaire and the Subscription Agreement are collectively referred to as the “Agreement.”  If the Subscriber Questionnaire indicates that any Subscriber’s response to a question requires further information, the Subscriber should contact the Company as soon as possible.  Subscribers must complete and return all other additional required documentation, including an IRS Form W-9.
1. U.S. Person or Entity Status.

I represent and warrant that the Subscriber is a United States citizen or resident or a corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any state of the United States.

[
I represent and warrant that the International Subscriber is not a United States citizen or resident, corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any state of the United States.]1
2. Accredited Investor or Qualified Purchaser Status.
To invest in this offering, the Subscriber must either be an “accredited investor,” within the meaning of Rule 501(a) under the Securities Act, or the Subscriber must be a “qualified purchaser,” within the meaning of Regulation A under the Securities Act.

[
Accredited Investor Status.  I represent and warrant that the Subscriber is an “accredited investor,” within the meaning of Rule 501(a) under the Securities Act, [and the Subscriber has been authenticated and verified by the Company’s accreditation service as an accredited investor.]2

[
Qualified Purchaser Status.  I represent and warrant that the Subscriber is a “qualified purchaser,” as defined in Regulation A of the Securities Act, based on the fact that either:


1 Text to be included in subscription agreement provided to investors subject to international jurisdictions.
2 To be included in form presented to subscriber for execution if subscriber completes accredited investor verification process in Dealmaker or other service.

a.
I am the Subscriber and I am a natural person.  I am not investing more than the greater of either 10% of my net worth3 or 10% of my annual income4; or
b.
The Subscriber is not a natural person, and the Subscriber is not investing more than the greater of the following, as calculated for the most recently completed fiscal year end:

(a)
10% of the Subscriber’s revenue; or

(b)
10% of the Subscriber’s net assets.]5
3. ERISA.  Benefit Plan Investor Status.  I represent and warrant that the Subscriber is not, and neither I nor the Subscriber is acting (directly or indirectly) on behalf of, any of the following:
 An employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act (“ERISA”)), whether or not the plan is subject to Title I of ERISA; a plan, individual retirement account or other arrangement that is subject to Section 4975 of the Internal Revenue Code (“Code”); a “benefit plan investor” within the meaning of 29 C.F.R. Section 2510.3-101; a “governmental plan” within the meaning of Section 3(32) of ERISA; or a person that is deemed to hold “plan assets” under the ERISA plan assets regulations, and consequently subject to regulation under ERISA.
 An entity 25% or more of the value of any class of equity of which is held by entities described in the paragraph above; provided that for purposes of making the determination, the value of any equity interest held by a person (other than an entity described in the beginning of this item) who has discretionary authority or control with respect to the assets of the entity or a person who provides investment advice for a fee (direct or indirect) with respect to those assets, or any affiliate of that person, will be disregarded.
 A “benefit plan investor” based on the immediately preceding item, that is subject to Title I of ERISA or Section 4975 of the Code.
4. Additional Information.
BY PURCHASING THE SECURITIES, THE SUBSCRIBER EXPRESSLY ACKNOWLEDGES AND ASSUMES THESE RISKS.
 The Subscriber acknowledges that the Subscription Information has been prepared without taking into account the Subscriber’s objectives, financial situation, or needs, or those of any other person.  The Subscriber acknowledges that it is recommended that the Subscriber seek independent legal, financial, accounting, and taxation advice before making a decision to acquire, subscribe for, or purchase the Securities.


3 For purposes of this paragraph, “net worth” must be calculated as set forth in Rule 501(a) under the Securities Act of 1933, as amended.  In general, “net worth” means the excess of total assets at fair market value over total liabilities.  For the purposes of determining “net worth,” the primary residence owned by an individual shall be excluded as an asset.  Any liabilities secured by the primary residence should be included in total liabilities only if and to the extent that:  (1) such liabilities exceed the fair market value of the residence; or (2) such liabilities were incurred within 60 days before the sale of the Securities (other than as a result of the acquisition of the primary residence).
4 For purposes of this paragraph, “annual income” must be calculated as set forth in Rule 501(a) under the Securities Act of 1933, as amended, which requires natural persons to consider their income in the two most recent years and a reasonable expectation of income for the current year.
5 To be included in form presented to subscriber for execution if subscriber makes applicable representation in invest flow.

 The Subscriber agrees that at any time in the future at which the Subscriber may acquire the Securities, the Subscriber shall be deemed to have reaffirmed, as of the date of acquisition of the Securities, each and every representation and warranty made by the Subscriber in this Agreement or any other instrument provided by the Subscriber to the Company in connection with that acquisition, except to the extent modified in writing by the Subscriber and consented to by the Company.
 The Subscriber agrees on behalf of the Subscriber and the Subscriber’s successors and assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish and deliver any other instruments, documents and statements and to take any other actions as the Company may determine to be necessary or appropriate to comply with applicable law and to effectuate and carry out the purposes of this Agreement.  The Subscriber further agrees that the Company may, in its sole discretion, refuse to sell me a Security if, among other things, the Subscriber refuses to comply with this provision.
5. Review of Subscription Information.
 The Subscriber acknowledges and agrees that the Subscriber has received, and should read and carefully review, the following documents (collectively, the “Subscription Information”) in connection with submitting this Subscriber Questionnaire:

a.
The Offering Circular;

[b.
The International Supplement which accompanies the US Offering Circular (the “International Supplement”)]6

c.
The terms of use for the _______ website operated by the Company (“Terms of Use”);

d.
The privacy notice for the Company and its affiliates (“Privacy Notice”); and

e.
This Agreement, which sets forth the terms governing my subscription to the Securities, and sets forth certain representations I am making in connection with my subscription to the Securities.
6. Resident Status of Arizona, North Dakota, Texas, Florida, Alabama, New Jersey and Washington.
I am not an individual, partnership, corporation, association, joint stock association, trust or other entity, however organized, that resides, is located, has a place of business, or is conducting business in the state of Arizona, North Dakota, Texas, Florida, Alabama, New Jersey or Washington.
7. Subscriber Information.
Signatory name:

Signatory title (if applicable):

Entity address:
Entity Name:

E-Mail Address:

 
Aggregate Investment (USD value):

 
Price per Security in general sale:

$0.75
Payment Method (USD):
 


6 Text to be included in subscription agreement provided to investors subject to international jurisdictions.

I represent and warrant to the Company that the answers provided in this Subscriber Questionnaire are current, true, correct and complete and may be relied upon by the Company and its respective affiliates in evaluating my eligibility, or the eligibility of the entity that I represent, as a Subscriber and determining whether to accept this Agreement.  I will notify the Company of any change to the information provided in this Subscriber Questionnaire promptly, but in any event within fifteen days of such change.
I agree to be bound (or, if I am an authorized representative of the Subscriber, I agree that the Subscriber will be bound) by any affirmation, assent or agreement that I transmit to or through this website by computer or other electronic device, including internet, telephonic and wireless devices, including, but not limited to, any consent I give to receive communications from the Company or any of its affiliates solely through electronic transmission.  I agree that when I click on an “I Agree,” “I Consent” or other similarly worded button or entry field with my mouse, keystroke or other device, my agreement or consent will be legally binding and enforceable against me (or, if I am an authorized representative of the Subscriber, against the Subscriber) and will be the legal equivalent of my handwritten signature on an agreement that is printed on paper.  I agree that the Company and any of their affiliates will send me electronic copies of any and all communications associated with my subscription to the Securities, as provided in Section 6 of this Subscriber Questionnaire and Section 11 below of the Subscription Agreement.
I represent and warrant to the Company that all questions and responses provided by the Subscriber in the course of completing the “purchase flow” process, including without limitation, the information reflected in this Subscriber Questionnaire, as well as Subscriber’s contact information, address, and account information, Subscriber’s social security number if Subscriber is a natural person, and, if Subscriber is an entity, Subscriber’s tax identification number and whether Subscriber is an S Corporation, C Corporation, Grantor Trust, Limited Partnership, General Partnership, Limited Liability Partnership, Limited Liability Company, Estate, or other type of entity, is current, true, correct and complete and may be relied upon by the Company and its respective affiliates.  I will notify the Company of any change to this information promptly, but in any event within fifteen days of such change.


SUBSCRIPTION AGREEMENT
This Subscription Agreement (the “Agreement”) applies to the initial subscription to the Units (defined hereunder) of securities, issued by Flora Growth Corp., a corporation incorporated under the laws of the Province of Ontario, Canada (the “Company”) and is made and entered into by and between the undersigned (the “Subscriber”) and the Company.  Subject to the terms and conditions provided in this Agreement, and to the terms of the other Subscriber Agreements, as defined below, the Subscriber wishes to irrevocably subscribe for and purchase (subject to acceptance of such subscription by the Company) certain securities (the “Securities”), as set forth in Section 1, offered pursuant to the offering circular with respect to the offer and sale of the Securities in effect and filed with the Securities and Exchange Commission (“SEC”) under Regulation A (“Regulation A”) under the Securities Act of 1933, as amended (“Securities Act”) as of the date hereof (the “Offering Circular”). Each “Unit” of securities is comprised of one common share in the capital of the Company, with no par value per share (a “Common Share”), and one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”), attached hereto as Exhibit A, to purchase one additional Common Share (a “Warrant Share”) at an exercise price of $1.00 USD per Warrant Share, subject to certain adjustments, over an 18-month exercise period following the date of issuance of the Warrant.  (each, a “Unit” and Units collectively referenced herein, as the “Securities”). Each Unit is being offered at a purchase price of $0.75 USD per Security on a “best efforts” basis.
A. The Company is a corporation incorporated under the laws of the Province of Ontario, Canada.
B. The offering of the Securities (the “Offering”) is described in the Offering Circular that is available through the online website platform located at www.floragrowth.ca (the “Site”), which is owned and operated by the Company, as well as on the SEC EDGAR website.  It is the responsibility of the Subscriber to read the Offering Circular and all other Subscription Information (defined below).  While these documents are subject to change, the Company advises the Subscriber to print and retain a copy of these documents for the Subscriber’s records.  By signing this Agreement electronically, Subscriber agrees to be bound by the terms of the Subscriber Agreements, as defined below, with respect to Subscriber’s subscription to the Securities, and Subscriber agrees that by signing this Agreement electronically, Subscriber is also deemed to have signed each of the remaining Subscriber Agreements, to consent to the Company’s Privacy Notice, and to agree to transact business with the Company and to receive communications relating to the Securities electronically.
C. [The Subscriber hereby represents that he, she or it is: (i) a United States citizen or resident or a corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any state of the United States; and (ii) is either (1) an “accredited investor,” as that term is defined under Regulation D under the Securities Act, or (2) is a “qualified purchaser,” as that term is defined under Regulation A under the Securities Act.]1
D. Except as the context otherwise requires, any reference in this Agreement to:
1. Subscription Information” shall mean collectively:
a. The Subscriber Agreements;
[b. The International Supplement;] 2
c. The Offering Circular;
d. All exhibits to the offering circular, including all “testing the waters” materials filed therewith in compliance with Rule 255 under the Securities Act; and
e. The privacy notice for the Company and its affiliates (the “Privacy Notice”).


1 Text for use in the United States.
2 Text to be included in subscription agreement provided to investors subject to international jurisdictions.

2. Flora Parties” shall mean the Company and any of its affiliates, and each of their respective directors, managers, officers, shareholders, members, partners, employees or agents.
3. Subscriber” shall mean the natural person (whether individually or jointly with another person) or entity subscribing for the Securities.
4. Subscriber Agreements” shall mean collectively:
a. The questions and responses provided by the Subscriber in the course of completing the “invest flow” process, including without limitation the account information questionnaire, on the Site (the “Subscriber Questionnaire”);
b. The terms of use for the  website operated by the Company located at www.floragrowth.ca (the “Terms of Use”); and
c. This Agreement, which sets forth the terms governing a subscription to the Securities, and sets forth certain representations made in connection with a subscription to the Securities.
SUBSCRIBER’S REPRESENTATIONS, WARRANTIES AND COVENANTS
1. Subscription for and Purchase of the Securities
1.1 Subject to the express terms and conditions of this Agreement, the Subscriber hereby irrevocably subscribes for and agrees to purchase the Securities (the “Purchase”) in the amount of the purchase price (the “Purchase Price”) set forth in the Subscriber Questionnaire.
1.2 The Subscriber must initially purchase at least the minimum number of Securities established by the Company as specified in the Offering Circular.  There is no minimum subscription requirement on additional purchases once the Subscriber has purchased this minimum number of Securities.
1.3 Once the Subscriber’s subscription to purchase the Securities is accepted by the Company (as evidenced by the Company’s counter signature to this Agreement), the commitment is irrevocable (except pursuant to Section 16 herein) until the Securities are issued, the Purchase is rejected by the Company, or the Company otherwise determines not to consummate the transaction.
1.4 The Company has the right to reject this Agreement in whole or in part for any reason.  Once the Agreement is accepted by the Company, the Subscriber may not cancel, terminate or revoke this Agreement (except pursuant to Section 16 herein), which, in the case of an individual, shall survive his death or disability and shall be binding upon the Subscriber, his heirs, trustees, beneficiaries, executors, personal or legal administrators or representatives, successors, transferees and assigns.
1.5 The purchase price for the Securities shall be paid concurrently with the electronic execution and delivery to the Company of this Subscription Agreement.  Subscriber shall deliver the Purchase Price to the Company, in accordance with the instructions set forth in the Subscriber Questionnaire.  The Subscriber understands that the Company will not accept this Agreement until the full amount of the Purchase Price has been delivered to the Company.
1.6 If this Agreement is accepted by the Company, the Subscriber agrees to comply fully with the terms of the Subscriber Agreements.  The Subscriber further agrees to execute any other necessary documents or instruments in connection with this subscription and the Subscriber’s purchase of the Securities.
1.7 Subscriber understands and acknowledges that the Purchase Price for the Securities will be immediately available to the Company acceptance of the subscription by the Company.  If this Agreement is accepted by the Company, the Subscriber hereby authorizes the Company to utilize the cash proceeds in the Company’s sole discretion in accordance with the use of proceeds provided in the Offering Circular (the “Closing”).

1.8 In the event that (i) this Agreement is rejected in full or (ii) this Agreement is terminated in accordance with Section 16 following its acceptance (in full or in part), the Company will direct any payment made by the Subscriber to the Company for the Securities that has not previously been refunded to be refunded to the Subscriber by the Company without interest and without deduction, and all of the obligations of the Subscriber hereunder shall terminate.  To the extent that this Agreement is rejected in part, the Company shall refund to the Subscriber any payment made by the Subscriber to the Company with respect to the rejected portion of this subscription without interest and without deduction, and all of the obligations of Subscriber hereunder shall remain in full force and effect except for those obligations with respect to the rejected portion of this subscription, which shall terminate.
1.9 Upon acceptance of this Agreement by the Company and payment of the Purchase Price by the Subscriber and receipt of the Purchase Price by the Company, the Company agrees to deliver the Securities to the Subscriber at the Closing as described in the Offering Circular, subject to the terms of this Agreement, and in all cases understanding that the Company has full discretion to accept or reject this Agreement at any time prior to Closing.
2. Subscriber’s Review of Information and Subscription Decision.
2.1 The Subscriber acknowledges and understands that it is solely the Subscriber’s responsibility to read the Subscription Information and make a determination to subscribe to the Securities.  The Subscriber and/or the Subscriber’s advisers, who are not affiliated with and not compensated directly or indirectly by any of the Flora Parties, have such knowledge and experience in business and financial matters as will enable them to utilize the information which they have received in connection with the Company and its business to evaluate the merits and risks of a subscription, to make an informed decision and to protect Subscriber’s own interests in connection with the Purchase.  The Subscriber understands that Greenberg Traurig, LLP acts as counsel only to the Company and does not represent the Subscriber or any other person by reason of purchasing the Securities.
2.2 The Subscriber is subscribing for and purchasing the Securities without being furnished any offering literature other than the Subscription Information, and is making this subscription decision solely in reliance upon the information contained in the Subscription Information and upon any investigation made by the Subscriber or Subscriber’s advisers, but not on any recommendation to subscribe to the Securities by any Flora Party.
2.3 The Subscriber’s subscription to the Securities is consistent with the purposes, objectives and cash flow requirements of the Subscriber.
2.4 The Subscriber understands that the Securities being purchased are a speculative purchase that involves a substantial degree of risk of loss of the Subscriber’s entire purchase price in the Securities, and the Subscriber understands and is fully cognizant of the risk factors related to the purchase of the Securities.  The Subscriber has received and has had the opportunity to review the Subscription Information including the risk factors set forth in the Offering Circular.  Neither the Company nor anyone on its behalf has made any representations (whether written or oral) to the Subscriber (i) regarding the future value or utility of the Securities or (ii) that the past business performance and experience of the Flora Parties will in any way predict the current or future value or utility of the Securities.
2.5 The Subscriber understands that any forecasts or predictions as to the Company’s performance are based on estimates, assumptions and forecasts that the Company believes to be reasonable but that may prove to be materially incorrect, and no assurance is given that actual results will correspond with the results contemplated by the various forecasts.
2.6 At no time has it been expressly or implicitly represented, guaranteed or warranted to the Subscriber by the Company, any other Flora Party, or any other person that:
2.6.1 a percentage of profit and/or amount or type of gain or other consideration will be realized as a result of this subscription; or
2.6.2 the past performance or experience of any other purchase sponsored by any Flora Party in any way indicates the predictable or probable results of the ownership of the Securities or the overall venture.

2.7 The purchase of the Securities (i) does not provide Subscriber with rights of any form with respect to the Company or its revenues or assets, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights; (ii) is not a loan to Company; (iii) does not create any binding obligation enforceable against the Company with respect to the Securities following their delivery; and (iv) does not provide Subscriber with any ownership or other interest in the Company.
2.8 The Company retains all current and future right, title and interest in all of the Company’s intellectual property, including, without limitation, inventions, ideas, concepts, code, discoveries, processes, marks, methods, software, compositions, formulae, techniques, information and data, whether or not patentable, copyrightable or protectable in trademark, and any trademarks, copyright or patents based thereon.  Subscriber may not use any of Company’s intellectual property for any reason without Company’s prior written consent.
2.9 The Subscriber represents and agrees that none of the Flora Parties have recommended or suggested the acquisition of Securities to the Subscriber.
   3. Subscriber’s Representations Related to a Subscription in the Securities.
3.1 The Subscriber, if an entity, is, and shall at all times while it holds the Securities remain, duly organized, validly existing and in good standing under the laws of the state or other jurisdiction of the United States of America of its incorporation or organization, having full power and authority to own its properties and to carry on its business as conducted.  The Subscriber, if a natural person, is eighteen years of age or older, competent to enter into a contractual obligation, and a citizen or resident of the United States of America.  The principal place of business or principal residence of the Subscriber is as shown in the Subscriber Questionnaire.
3.2 The Subscriber has the requisite power and authority to deliver this Agreement, perform his, her or its obligations set forth in this Agreement, and consummate the transactions contemplated in this Agreement.  The Subscriber has duly executed and delivered this Agreement and has obtained the necessary authorization to execute and deliver this Agreement and to perform his, her or its obligations in this Agreement and to consummate the transactions contemplated in this Agreement.  This Agreement, assuming the due execution and delivery hereof by the Company, is a legal, valid and binding obligation of the Subscriber enforceable against the Subscriber in accordance with its terms.
3.3 The Subscriber is subscribing for and purchasing the Securities solely for the Subscriber’s own account, and not with a view toward or in connection with resale, distribution (other than to its shareholders or members, if any), subdivision or fractionalization thereof.  The Subscriber has no agreement or other arrangement, formal or informal, with any person or entity to sell, transfer or pledge any part of the Securities, or which would guarantee the Subscriber any profit, or insure against any loss with respect to the Securities, and the Subscriber has no plans to enter into any such agreement or arrangement.
3.4 The Subscriber represents and warrants that the execution and delivery of this Agreement, the consummation of the transactions contemplated in this Agreement and the performance of the obligations outlined in this Agreement will not conflict with or result in any violation of or default under any provision of any other agreement or instrument to which the Subscriber is a party or any license, permit, franchise, judgment, order, writ or decree, or any statute, rule or regulation, applicable to the Subscriber.  The Subscriber confirms that the consummation of the transactions envisioned in this Agreement, including, but not limited to, the Subscriber’s Purchase, will not violate any foreign law and that such transactions are lawful in the Subscriber’s country of citizenship and residence.
3.5 The Subscriber is able to bear the economic risk of this purchase and, without limiting the generality of the foregoing, is able to hold the Securities for an indefinite period of time.  The Subscriber has adequate means to provide for the Subscriber’s current needs and personal contingencies and has a sufficient net worth to sustain the loss of the Subscriber’s entire subscription in the Securities.
3.6 Neither (i) the Subscriber, (ii) any of its directors, executive officers, other officers that may serve as director or officer of any company in which it invests, general partners or managing

partners, nor (iii) any beneficial owner of the Company’s voting equity securities (in accordance with Rule 262 of the Securities Act) held by the Subscriber is subject to any Disqualifying Event3

3Disqualifying Event” means the following:
(1) within the past ten years, conviction of a felony or misdemeanor (i) in connection with the purchase or sale of any security; (ii) involving the making of any false filing with the SEC or (iii) arising out of the conduct of the business of being an underwriter, broker, dealer, municipal securities dealer, investment advisor or paid solicitor of purchasers of securities;
(2) was the subject to an order, judgment or decree of any court of competent jurisdiction, entered within the prior five years, that restrains or enjoins the Subscriber from engaging or continuing to engage in any conduct or practice (i) in connection with the purchase or sale of any security; (ii) involving the making of any false filings with the SEC; or (iii) arising out of the conduct of the business of being an underwriter, broker, dealer, municipal securities dealer, investment advisor or paid solicitor of purchasers of securities;
(3) the subject of a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that (i) bars the Subscriber from (a) association with an entity regulated by such commission, authority, agency, or officer, (b) engaging in the business of securities, insurance or banking or (c) engaging in savings association or credit union activities; or (ii) constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within the past ten years;
(4) subject to an order of the SEC entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 or section 203(e) or (f) of the Investment Advisers Act of 1940 that (i) suspends the Subscriber’s registration as a broker, dealer, municipal securities dealer or investment adviser; (ii) places limitations on the Subscriber’s activities, functions or operations of, or imposes civil money penalties on the Subscriber; or (iii) bars the Subscriber from being associated with any entity or from participating in the offering of any penny stock;
(5) subject to any order of SEC entered within the prior five years that orders the Subscriber to cease and desist from committing or causing a violation or future violation of (i) any scienter-based anti-fraud provision of the federal securities laws or (ii) Section 5 of the Securities Act;
(6) suspension or expulsion from membership in, or suspension or bar from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;
(7) having filed (as a registrant or issuer), or named as an underwriter in any registration statement or Regulation A offering statement filed with the SEC that, within the past five years, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is currently the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; and
(8) was subject to a United States Postal Services (“USPS”) false representation order entered within the previous five years, or currently is subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the USPS to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

3.7 except for Disqualifying Events covered by Rule 262(b)(2) or (3) or Rule 262(c) under the Securities Act and disclosed reasonably in advance of the Purchase in writing in reasonable detail to the Company.
3.8 The Subscriber understands that no state or federal authority has scrutinized this Agreement or the Securities offered pursuant hereto, has made any finding or determination relating to the fairness for purchase of the Securities, or has recommended or endorsed the Securities, and that the Securities have not been registered under the Securities Act or any state securities laws, in reliance upon exemptions from registration thereunder.
3.9 Subscriber represents and warrants that Subscriber:  (a) (1) is not located or domiciled; (2) does not have a place of business; or (3) is not a Resident of, or located in, a jurisdiction that is subject to U.S. or other sovereign country sanctions or embargoes, or (2) an individual, or an individual employed by or associated with an entity, identified on the U.S. Department of Commerce’s Denied Persons or Entity List, the U.S. Department of Treasury’s Specially Designated Nationals or Blocked Persons Lists, or the U.S. Department of State’s Debarred Parties List.  Subscriber agrees that if Subscriber’s country of residence or other circumstances change such that the above representations are no longer accurate, Subscriber will immediately cease using the Securities.  Subscriber further represents and warrants that if Subscriber is purchasing the right to receive the Securities on behalf of a legal entity: (1) such legal entity is duly organized and validly existing under the applicable laws of the jurisdiction of its organization, and (2) Subscriber is duly authorized by such legal entity to act on its behalf.
4. Information Provided by Subscriber.
4.1 The information that the Subscriber has furnished in the Investor Questionnaire, including (without limitation) the information furnished by the Subscriber to the Company regarding whether Subscriber qualifies as (i) an “accredited investor” as that term is defined in Rule 501 under Regulation D under the Securities Act and/or (ii) a “qualified purchaser” as that term is defined in Rule 256 under Regulation A under the Securities Act, is correct and complete as of the date of this Agreement and will be correct and complete on the date, if any, that the Company accepts this Agreement.  Further, the Subscriber shall immediately notify the Company of any change in any statement made in this Agreement prior to the Subscriber’s receipt of the Company’s acceptance of this Agreement, including, without limitation, Subscriber’s status as an “accredited investor” and/or a “qualified purchaser.”  The representations and warranties made by the Subscriber may be fully relied upon by the Company, and any other Flora Party, and by any investigating party relying on them.  The Subscriber acknowledges and agrees that the Subscriber shall be liable for any loss, liability, claim, damage and expense whatsoever (including all expenses incurred in investigating, preparing or defending against any claim whatsoever) arising out of or based upon any inaccuracy in the representations and warranties in the information provided by the Subscriber.
4.2 The Subscriber confirms that all information and documentation provided to the Company, including but not limited to all information regarding the Subscriber’s identity and source of funds to be used to purchase the Securities, is true, correct and complete.  The Subscriber is currently a bona fide resident of the state or jurisdiction set forth in the current address provided to the Company.  The Subscriber has no present intention of becoming a resident of any other state or jurisdiction.
4.3 The representations, warranties, agreement, undertakings and acknowledgments made by the Subscriber in this Agreement will be relied upon by the Flora Parties and counsel to the Company in determining, among other things, whether to allow the Subscriber to purchase the Securities.  The representations, warranties, agreements, undertakings and acknowledgments made by the Subscriber in this Agreement shall survive the Subscriber’s purchase of the Securities.  The Subscriber agrees to notify the Company immediately if any of the Subscriber’s representations, warranties and covenants contained in this Agreement become untrue or incomplete in any respect.
4.4 The Flora Parties may rely conclusively upon and shall incur no liability in respect of any action taken upon any notice, consent, request, instructions or other instrument believed in good faith to be genuine or to be signed by properly authorized persons of the Subscriber.

5. Rights to Use Subscriber Information.
5.1 The Subscriber agrees and consents that the Flora Parties and any administrator appointed from time to time with respect to the Company (the “Administrator”) may obtain, hold, use, disclose, transfer, and otherwise process the Subscriber’s data, including but not limited to the contents of the Subscription Agreements:
5.1.1 as the Flora Parties or the Administrator reasonably deem necessary or appropriate to facilitate the acceptance, management and administration of the Subscriber’s subscription for the Securities, on an ongoing basis;
5.1.2 to provide notice of, and/or to seek consent to uses or disclosures of such data for specific purposes;
5.1.3 for any specific purposes where the Subscriber has given specific consent to do so;
5.1.4 to carry out statistical analysis and market research, whereby the products of such statistical analysis or market research are not disclosed outside of the Flora Parties or the Administrator on a basis in which Subscriber is identifiable without the Subscriber’s specific consent;
5.1.5 as the Flora Parties or the Administrator reasonably deem necessary or appropriate to comply with legal process, court orders, or other legal, regulatory, or self-regulatory requirements, requests, or investigations applicable to the Flora Parties, the Administrator or the Subscriber, including, but not limited to, in connection with anti-money laundering and similar laws, or to establish the availability under any applicable law of an exemption from registration of the Securities or to establish compliance with applicable law generally by the Flora Parties;
5.1.6 for disclosure or transfer to third parties, including the Subscriber’s financial adviser (where appropriate), regulatory bodies, auditors or technology providers to any of the Flora Parties or the Administrator, as reasonably necessary for the purposes described in this Section 5.1; and
5.1.7 for any other purposes described in the Privacy Notice or the Subscriber Agreements.
5.2 The Subscriber agrees and consents to disclosure by the Flora Parties or the Administrator to relevant third parties of information pertaining to the Subscriber in respect of disclosure and compliance policies or information requests related thereto.
5.3 The Subscriber authorizes the Flora Parties and any of their agents to disclose the Subscriber’s nonpublic personal information to comply with regulatory and contractual requirements applicable to the Flora Parties.  Any such disclosure shall, to the fullest extent permitted by law, be permitted notwithstanding any privacy policy or similar restrictions regarding the disclosure of the Subscriber’s nonpublic personal information.
6. Relationship Between Subscriber and the Flora Parties.
6.1 Subscriber acknowledges and agrees that the purchase and sale of the Securities pursuant to this Agreement is an arms-length transaction between the Subscriber and the Company.  In connection with the purchase and sale of the Securities, none of the Company nor any other Flora Party is acting as the Subscriber’s agent or fiduciary.  The Flora Parties assume no advisory or fiduciary responsibility in connection with the Securities.  The Flora Parties have not provided Subscriber with any legal, accounting, regulatory or tax advice with respect to the Securities, and Subscriber has consulted its own respective legal, accounting, regulatory and tax advisers to the extent Subscriber deems appropriate.
7. Regulatory Limitations and Requirements.
7.1 The Subscriber understands, acknowledges and agrees that the sale of  the Securities contemplated in this Agreement is not fully registered with the SEC because it is being made in reliance on Regulation A under the Securities Act, which exempts the Company from certain reporting and

other requirements related to the Company, the Securities and their sale, and that the Company is not registered or licensed with any federal or state regulator as an investment adviser, broker-dealer, money services business, money transmitter, or virtual currency business, or under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) or the Investment Company Act of 1940 (“1940 Act”).  As a result, the Subscriber will not be afforded the full set of protections provided to the clients and customers of such entities under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Advisers Act or the 1940 Act, or any money services business, money transmitter, or virtual currency laws.
7.2 The Subscriber understands and agrees that if, at any time, it is determined that the Company is not in compliance with the Securities Act, the Exchange Act, the Advisers Act, or the 1940 Act, or is otherwise not in compliance with applicable law, the Company may take any corrective action it determines is appropriate, in its sole and absolute discretion.
7.3 The Subscriber understands that the Securities are not legal tender, are not backed by the government, and accounts and value balances are not subject to Federal Deposit Insurance Corporation or Securities Purchaser Protection Corporation protections.
7.4 The Subscriber understands that he or she may be barred from purchasing the Securities if the Subscriber is (i) an employee benefit plan that is subject to the fiduciary responsibility standards and prohibited transaction restrictions of part 4 of Title I of U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) any plan to which Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) applies, (iii) a private investment fund or other entity whose assets are treated as “plan assets” for purposes of ERISA and Section 4975 of the Code or (iv) an insurance company, whose general account assets are treated as “plan assets” for purposes of ERISA and Section 4975 of the Code.  The Subscriber has notified the Company if it falls into (i) — (iv) of this paragraph.
[7.5. THE SUBSCRIBER REPRESENTS AND WARRANTS THAT IT WILL REVIEW AND CONFIRM THE INFORMATION PROVIDED ON AN INTERNAL REVENUE SERVICE (THE “IRS”) FORM W-9, WHICH WILL BE GENERATED AND PROVIDED TO THE COMPANY VIA THE SITE.  THE SUBSCRIBER CERTIFIES THAT THE FORM W-9 INFORMATION CONTAINED IN THE EXECUTED COPY (OR COPIES) OF IRS FORM W-9 (AND ANY ACCOMPANYING REQUIRED DOCUMENTATION), AS APPLICABLE, WHEN SUBMITTED TO THE COMPANY WILL BE TRUE, CORRECT AND COMPLETE.  THE SUBSCRIBER SHALL (I) PROMPTLY INFORM THE COMPANY OF ANY CHANGE IN SUCH INFORMATION, AND (II) FURNISH TO THE COMPANY A NEW PROPERLY COMPLETED AND EXECUTED FORM, CERTIFICATE OR ATTACHMENT, AS APPLICABLE, AS MAY BE REQUIRED UNDER THE INTERNAL REVENUE SERVICE INSTRUCTIONS TO SUCH FORM W-9, THE CODE OR ANY APPLICABLE TREASURY REGULATIONS OR AS MAY BE REQUESTED FROM TIME TO TIME BY THE COMPANY.]4
[7.5. Reserved]5
7.6 It is the intent of the Flora Parties to comply with all applicable federal, state and local laws designed to combat money laundering and similar illegal activities.  Subscriber hereby represents, covenants, and agrees that, to the best of Subscriber’s knowledge based on reasonable investigation:
7.6.1  None of the Subscriber’s funds tendered for the Purchase Price (whether payable in cash or otherwise) shall be derived from money laundering or similar activities deemed illegal under federal laws and regulations.
7.6.2  To the extent within the Subscriber’s control, none of the Subscriber’s funds tendered for the Purchase Price (whether payable in cash or otherwise) will cause any Flora Party to be in violation of federal anti-money laundering laws or regulations.

4 Text to be included in subscription agreement provided to investors subject to US jurisdiction.
5 Text to be included in subscription agreement provided to investors subject to international jurisdictions.

7.6.3  When requested by the Company, the Subscriber will provide any and all additional information, and the Subscriber understands and agrees that the Company or any other Flora Party may release confidential information about the Subscriber and, if applicable, any underlying beneficial owner or Related Person6 to U.S. regulators and law enforcement authorities, deemed reasonably necessary to ensure compliance with all applicable laws and regulations concerning money laundering and similar activities.  The Company reserves the right to request any information as is necessary to verify the identity of the Subscriber and the source of any payment to the Company.  In the event of delay or failure by the Subscriber to produce any information required for verification purposes, a subscription by the Subscriber may be refused.
7.6.4  Neither the Subscriber, nor any person or entity controlled by, controlling or under common control with the Subscriber, nor any of the Subscriber’s beneficial owners, nor any person for whom the Subscriber is acting as agent or nominee in connection with this subscription, nor, in the case of a Subscriber which is an entity, any Related Person is:
a. a Prohibited Subscriber;7
b. a Senior Foreign Political Figure,8 any member of a Senior Foreign Political Figure’s “immediate family,” which includes the figure’s parents, siblings, spouse, children and in-laws, or any Close Associate of a Senior Foreign Political Figure,9 or a person or entity resident in, or organized or chartered under, the laws of a Non-Cooperative Jurisdiction;10 or
c. a person or entity resident in, or organized or chartered under, the laws of a jurisdiction that has been designated by the U.S. Secretary of the Treasury under Section 311 of the Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 as warranting special measures due to money laundering concerns.


6Related Person” shall mean, with respect to any entity, any interest holder, director, senior officer, trustee, beneficiary or grantor of such entity; provided that in the case of an entity that is a publicly traded company or a tax qualified pension or retirement plan in which at least 100 employees participate that is maintained by an employer that is organized in the U.S. or is a U.S. government entity, the term “Related Person” shall exclude any interest holder holding less than 5% of any class of securities of such publicly traded company and beneficiaries of such plan.
7Prohibited Subscriber” shall mean a person or entity whose name appears on (i) the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control; (ii) other lists of prohibited persons and entities as may be mandated by applicable law or regulation; or (iii) such other lists of prohibited persons and entities as may be provided to any Flora Party in connection therewith.
8Senior Foreign Political Figure” shall mean a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation.  In addition, a Senior Foreign Political Figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a Senior Foreign Political Figure.
9Close Associate of a Senior Foreign Political Figure” shall mean a person who is widely and publicly known internationally to maintain an unusually close relationship with the Senior Foreign Political Figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the Senior Foreign Political Figure.
10Non-Cooperative Jurisdiction” shall mean any foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force, of which the U.S. is a member and with which designation the U.S. representative to the group or organization continues to concur.

7.6.5  The Subscriber hereby agrees to immediately notify the Company if the Subscriber knows, or has reason to suspect, that any of the representations in this Section 7.6 have become incorrect or if there is any change in the information affecting these representations and covenants.
7.6.6  The Subscriber agrees that, if at any time it is discovered that any of the foregoing anti-money laundering representations are incorrect, or if otherwise required by applicable laws or regulations, the Company may undertake appropriate actions, and the Subscriber agrees to cooperate with such actions, to ensure compliance with such laws or regulations.
7.6.7  The Subscriber acknowledges and agrees that the Company, in complying with anti-money laundering statutes, regulations and goals, may file any information with governmental and law enforcement agencies to identify transactions and activities that the Company or its agents reasonably determines to be suspicious, or as otherwise required by law.
8.              Tax Requirements.
8.1 The Subscriber certifies that the Subscriber has completed and submitted any required waiver of local privacy laws that could otherwise prevent disclosure of information to the Company, the IRS or any other governmental authority for purposes of Chapter 3, Chapter 4 or Chapter 61 of the Internal Revenue Code (the “Code”) (including without limitation in connection with FATCA, as defined below) or any intergovernmental agreement entered into in connection with the implementation of the FATCA (an “IGA”), and any other documentation required to establish an exemption from, or reduction in, withholding tax or to permit the Company to comply with information reporting requirements pursuant to Chapter 3, Chapter 4 or Chapter 61 of the Code (including, without limitation, in connection with FATCA or any IGA).
8.2 The Subscriber further certifies that the Subscriber will provide to the Company prior to the Closing an IRS Form W-9, appropriate IRS Form W-8 or other applicable IRS Forms and any additional documentation required by the Company for purposes of satisfying the Company’s obligations under the Code, and in any event the Company may require such documentation prior to the delivery of the Securities to the Subscriber.
8.3 The Subscriber will (a) provide, upon request, prompt written notice to the Company, and in any event within 30 days of such request, of any change in the Subscriber’s U.S. tax or withholding status, and (b) execute properly and provide to the Company, within 30 days of written request by the Company, any other tax documentation or information that may be reasonably required by the Company in connection with the operation of the Company to comply with applicable laws and regulations (including, but not limited to, the name, address and taxpayer identification number of any “substantial U.S. owner” (as defined in the Code) of the Subscriber or any other document or information requested by the Company  in connection with the Company complying with FATCA and/or any IGA or as required to reduce or eliminate any withholding tax directly or indirectly imposed on or collected by or with respect to the Company), and (c) execute and properly provide to the Company, within 30 days of written request by the Company, any tax documentation or information that may be requested by the Company.
8.4 The Subscriber further consents to the reporting of the information provided pursuant to this Section 8, in addition to certain other information, including, but not limited to, the value of the Subscriber’s purchase of the Securities to the IRS or any other governmental authority if the Company is required to do so under FATCA.
8.5 As used in this Agreement, “FATCA” means one or more of the following, as the context requires:  (i) Sections 1471 through 1474 of the Code and any associated legislation, regulations or guidance, or similar legislation, regulations or guidance enacted in any other jurisdiction which seeks to implement equivalent tax reporting, financial or tax information sharing, and/or withholding tax regimes, (ii) any intergovernmental agreement, treaty or any other arrangement between the United States and an applicable foreign country, entered into to facilitate, implement, comply with or supplement the legislation, regulations or guidance described in the foregoing clause (i), and (iii) any legislation, regulations or guidance implemented in a jurisdiction to give effect to the foregoing clauses (i) or (ii).

8.6 By executing this Agreement, the Subscriber understands and acknowledges that (i) the Company may be required to provide the identities of the Subscriber’s direct and indirect beneficial owners to a governmental entity, and (ii) the Subscriber hereby waives any provision of law and/or regulation of any jurisdiction that would, absent a waiver, prevent the Company from compliance with the foregoing and otherwise with applicable law as described in this Section 8.
8.7 The Subscriber confirms that the Subscriber has been advised to consult with the Subscriber’s independent attorney regarding legal matters concerning the Company and to consult with independent tax advisers regarding the tax consequences of purchasing the Securities.  The Subscriber acknowledges that Subscriber has received a copy of the Offering Circular [including, but not limited to, U.S. Federal Income Tax Considerations,]11 regarding certain tax consequences of purchasing the Securities, subject to adoption of new laws or regulations or amendments to existing laws or regulations.  The Subscriber acknowledges and agrees that none of the Flora Parties are providing any warranty or assurance regarding the tax consequences to the Subscriber by reason of the Purchase.
9. Other Risks.
9.1 The Subscriber (i) is able to bear the economic cost of holding the Securities for an indefinite period of time; (ii) has adequate means of providing for his, her, or its current needs and possible personal contingencies even in the event that the Securities lose all of their value; and (iii) has no need for liquidity of the Securities.  The Subscriber’s purchase of the Securities is consistent with the objectives and cash flow requirements of the Subscriber and will not adversely affect the Subscriber’s overall need for diversification and liquidity.
9.2 The Subscriber is solely responsible for reviewing, understanding and considering the risks above and any additional risks, including without limitation those described in the Offering Circular.  The Company’s operations, financial condition, and results of operations could be materially and adversely affected by any one or more of those risk factors, as could the underlying value of each Subscriber’s Securities, which may lead to the Securities losing all value.
10. Transfer and Storage of Personal Data.
10.1 The Subscriber understands and agrees that in connection with the services provided by the Company, its personal data may be transferred and/or stored in various jurisdictions in which the Flora Parties have a presence, including in or to jurisdictions that may not offer a level of personal data protection equivalent to the Subscriber’s country of residence.
10.2 The Subscriber further understands and agrees that, although the Flora Parties will use their reasonable efforts to maintain the confidentiality of the information provided in the Subscriber Questionnaire, the Flora Parties may disclose or transfer the Subscriber Agreements, and disclose or transfer other data of Subscriber, as described in Section 5.1.  Any disclosure, use, storage or transfer of information for these purposes shall not be treated as a breach of any restriction upon the disclosure, use, storage or transfer of information imposed on any person by law or otherwise.
11. Consent to Electronic Delivery of Notices, Disclosures and Forms.
11.1 The Subscriber understands that, to the fullest extent permitted by law, any notices, disclosures, forms, privacy statements, reports or other communications (collectively, “Communications”) regarding the Company, the Subscriber’s purchase of the Securities (including annual and other updates and tax documents) may be delivered by electronic means, such as by e-mail.  The Subscriber hereby consents to electronic delivery as described in the preceding sentence.  In so consenting, the Subscriber acknowledges that e-mail messages are not secure and may contain computer viruses or other defects, may not be accurately replicated on other systems or may be intercepted, deleted or interfered with, with or without the knowledge of the sender or the intended recipient.  The Subscriber also acknowledges that an e-mail from the Flora Parties may be accessed by recipients other than the Subscriber and may be interfered with, may contain computer viruses or other defects and may not be successfully replicated on other systems.  No Flora Party gives any warranties in relation to these matters.  The Subscriber further understands and agrees to each of the following:


11 If included.

11.1.1 Other than with respect to tax documents in the case of an election to receive paper versions, none of the Flora Parties or the Administrator will be under any obligation to provide the Subscriber with paper versions of any Communications.
11.1.2 Electronic Communications may be provided to the Subscriber via e-mail or a website of a Flora Party upon written notice of such website’s internet address to such Subscriber.  In order to view and retain the Communications, the Subscriber’s computer hardware and software must, at a minimum, be capable of accessing the Internet, with connectivity to an internet service provider or any other capable communications medium, and with software capable of viewing and printing a portable document format (PDF) file created by Adobe Acrobat.  Further, the Subscriber must have a personal e-mail address capable of sending and receiving e-mail messages to and from the Flora Parties or the Administrator.  To print the documents, the Subscriber will need access to a printer compatible with his or her hardware and the required software.
11.1.3 If these software or hardware requirements change in the future, a Flora Party will notify the Subscriber through the Site or other written notification.
11.1.4 To facilitate these services, the Subscriber must provide the Company with his or her current e-mail address and update that information as necessary.  Unless otherwise required by law, the Subscriber will be deemed to have received any electronic Communications that are sent to the most current e-mail address that the Subscriber has provided to the Company in writing.
11.1.5 None of the Flora Parties or the Administrator will assume liability for non-receipt of notification of the availability of electronic Communications in the event the Subscriber’s e-mail address on file is invalid; the Subscriber’s e-mail or Internet service provider filters the notification as “spam” or “junk mail”; there is a malfunction in the Subscriber’s computer, browser, internet service or software; or for other reasons beyond the control of the Flora Parties or the Administrator.
11.2 Solely with respect to the provision of tax documents by a Flora Party, the Subscriber agrees to each of the following:
11.2.1 If the Subscriber does not consent to receive tax documents electronically, a paper copy will be provided.
11.2.2 The Subscriber’s consent to receive tax documents electronically continues for every tax year of the Company until the Subscriber withdraws its consent by notifying the Company in writing.
12. Bankruptcy.
In the event that the Subscriber files or enters bankruptcy, insolvency or other similar proceeding, Subscriber agrees to use the best efforts possible to avoid any Flora Parties being named as a party or otherwise involved in the bankruptcy proceeding.  Furthermore, this Agreement should be interpreted so as to prevent, to the maximum extent permitted by applicable law, any bankruptcy trustee, receiver or debtor-in-possession from asserting, requiring or seeking that (i) Subscriber be allowed to return the Securities to the Company for a refund or (ii) the Company being mandated or ordered to redeem or withdraw the Securities held or owned by Subscriber.
13. Limitations on Damages.
13.1 IN NO EVENT SHALL THE COMPANY OR ANY OTHER FLORA PARTY BE LIABLE TO THE SUBSCRIBER FOR ANY LOST PROFITS OR SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES.  THE FOREGOING SHALL BE INTERPRETED AND HAVE EFFECT TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, RULE OR REGULATION.

13.2 IN NO EVENT WILL THE AGGREGATE LIABILITY OF THE COMPANY AND THE FLORA PARTIES (JOINTLY), WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE, WHETHER ACTIVE, PASSIVE OR IMPUTED), OR OTHER THEORY, ARISING OUT OF OR RELATING TO THESE TERMS EXCEED THE AMOUNT SUBSCRIBER PAYS TO THE COMPANY FOR THE SECURITIES.
14. Arbitration.  PLEASE READ SECTIONS 14.1 THROUGH 14.9 CAREFULLY BECAUSE THEY CONTAIN ADDITIONAL PROVISIONS APPLICABLE ONLY TO INDIVIDUALS LOCATED, RESIDENT OR DOMICILED IN THE UNITED STATES.  IF THE SUBSCRIBER IS LOCATED, RESIDENT OR DOMICILED IN THE UNITED STATES, THIS SECTION REQUIRES THE SUBSCRIBER TO ARBITRATE CERTAIN DISPUTES AND CLAIMS WITH THE COMPANY AND LIMITS THE MANNER IN WHICH A SUBSCRIBER CAN SEEK RELIEF FROM THE COMPANY.
14.1 Either party may, at its sole election, require that the sole and exclusive forum and remedy for resolution of a Claim be final and binding arbitration pursuant to this Section 14 (this “Arbitration Provision”).  The arbitration shall be conducted in New York City, New York.  As used in this Arbitration Provision, “Claim” shall include any past, present, or future claim, dispute, or controversy involving Subscriber (or persons claiming through or connected with Subscriber), on the one hand, and any of the Flora Parties (or persons claiming through or connected with the Flora Parties), on the other hand, relating to or arising out of this Agreement, any Securities, the Site, and/or the activities or relationships that involve, lead to, or result from any of the foregoing, including (except to the extent provided otherwise in the last sentence of Section 14.5 below) the validity or enforceability of this Arbitration Provision, any part of this Arbitration Provision, or the entire Agreement; provided, however, that “Claims” shall not be deemed to include any claims or disputes arising out of alleged breaches or violations of the federal and state securities laws of the United States.  Claims are subject to arbitration regardless of whether they arise from contract; tort (intentional or otherwise); a constitution, statute, common law, or principles of equity; or otherwise.  Claims include (without limitation) matters arising as initial claims, counter-claims, cross-claims, third-party claims, or otherwise.  The scope of this Arbitration Provision is to be given the broadest possible interpretation that is enforceable.
14.2 The party initiating arbitration shall do so with the American Arbitration Association or the Judicial Arbitration and Mediation Services, in accordance with their rules governing commercial arbitrations. Provided however, that the parties hereby agree that only one arbitrator shall hear and determine their dispute.  In the case of a conflict between the rules and policies of the administrator and this Arbitration Provision, this Arbitration Provision shall control, subject to countervailing law, unless all parties to the arbitration consent to have the rules and policies of the administrator apply.
14.3 Each party shall bear the expense of its own attorney’s fees, except as otherwise provided by law.  If a statute gives Subscriber the right to recover any of these fees, these statutory rights shall apply in the arbitration notwithstanding anything to the contrary in this Agreement, and the parties hereby consent to a determination by the arbitrator of a party’s entitlement to recover fees and the reasonable amount thereof.
14.4 Within 30 days of a final award by the arbitrator, a party may appeal the award for reconsideration by a three-arbitrator panel selected according to the rules of the arbitrator administrator.  In the event of such an appeal, an opposing party may cross-appeal within 30 days after notice of the appeal.  The panel will reconsider de novo all aspects of the initial award that are appealed.  Costs and conduct of any appeal shall be governed by this Arbitration Provision and the administrator’s rules, in the same way as the initial arbitration proceeding.  Any award by the individual arbitrator that is not subject to appeal, and any panel award on appeal, shall be final and binding, except for any appeal right under the Federal Arbitration Act (the “FAA”), and may be entered as a judgment in any court of competent jurisdiction.
14.5 The Flora Parties agree not to invoke their right to arbitrate an individual Claim that Subscriber may bring in Small Claims Court or an equivalent court, if any, so long as the Claim is pending only in that court.  EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NO ARBITRATION SHALL PROCEED ON A CLASS, REPRESENTATIVE, OR COLLECTIVE BASIS (INCLUDING AS PRIVATE ATTORNEY GENERAL ON BEHALF OF OTHERS), EVEN IF THE CLAIM OR CLAIMS THAT ARE THE SUBJECT OF THE ARBITRATION HAD PREVIOUSLY BEEN ASSERTED (OR COULD HAVE BEEN ASSERTED) IN A COURT AS CLASS REPRESENTATIVE, OR COLLECTIVE ACTIONS IN A COURT.

14.6 Unless otherwise provided in this Agreement or consented to in writing by all parties to the arbitration, no party to the arbitration may join, consolidate, or otherwise bring claims for or on behalf of two or more individuals or unrelated corporate entities in the same arbitration unless those persons are parties to a single transaction.  Unless consented to in writing by all parties to the arbitration, an award in arbitration shall determine the rights and obligations of the named parties only, and only with respect to the claims in arbitration, and shall not (i) determine the rights, obligations, or interests of anyone other than a named party, or resolve any Claim of anyone other than a named party, or (ii) make an award for the benefit of, or against, anyone other than a named party.  No administrator or arbitrator shall have the power or authority to waive, modify, or fail to enforce this Section 14.6 and any attempt to do so, whether by rule, policy, arbitration decision or otherwise, shall be invalid and unenforceable.  Any challenge to the validity of this Section 14.6 shall be determined exclusively by a court and not by the administrator or any arbitrator.
14.7 This Arbitration Provision is made pursuant to a transaction involving interstate commerce and shall be governed by and enforceable under the FAA.  The arbitrator will apply substantive law consistent with the FAA and applicable statutes of limitations.  The arbitrator may award damages or other types of relief permitted by applicable substantive law, subject to the limitations set forth in this Arbitration Provision.  The arbitrator will not be bound by judicial rules of procedure and evidence that would apply in a court.  The arbitrator shall take steps to reasonably protect confidential information.
14.8 This Arbitration Provision shall survive (i) suspension, termination, revocation, closure, or amendments to this Agreement and the relationship of the parties; (ii) the bankruptcy or insolvency of any party hereto or other party; and (iii) any transfer of any Securities to any other party.  If any portion of this Arbitration Provision other than Section 14.6 is deemed invalid or unenforceable, the remaining portions of this Arbitration Provision shall nevertheless remain valid and in force.  If arbitration is brought on a class, representative, or collective basis, and the limitations on such proceedings in Section 14.5 are finally adjudicated pursuant to the last sentence of Section 14.6 to be unenforceable, then no arbitration shall be had and any award issued shall be void and enforceable.  In no event shall any invalidation be deemed to authorize an arbitrator to determine Claims or make awards beyond those authorized in this Arbitration Provision.
14.9 THE PARTIES ACKNOWLEDGE THAT THEY HAVE A RIGHT TO LITIGATE CLAIMS THROUGH A COURT BEFORE A JUDGE, BUT WILL NOT HAVE THAT RIGHT IF ANY PARTY DEMANDS ARBITRATION PURSUANT TO THIS ARBITRATION PROVISION.  THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY WAIVE THEIR RIGHTS TO LITIGATE SUCH CLAIMS IN A COURT UPON DEMAND OF ARBITRATION BY ANY PARTY.  THE PARTIES HERETO WAIVE A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATED TO IT.
14.10 The Flora Parties agree and acknowledge that nothing in this Agreement shall be deemed to constitute a waiver of any Flora Party’s compliance with the federal securities laws and the rules and regulations thereunder, nor shall it constitute a waiver by the Subscriber of any of the Subscriber’s legal rights under applicable U.S. federal securities laws or any other laws whose applicability is not permitted to be contractually waived.  In addition, this Arbitration Provision shall not apply to claims arising under the U.S. federal securities laws.
15. Additional Information and Subsequent Changes in the Foregoing Representations, Warranties and Covenants.
15.1 The Subscriber agrees to provide any additional documentation the Company may reasonably request, including documentation as may be required by the Company to form a reasonable basis that the Subscriber qualifies as an “accredited investor” as that term is defined in Rule 501 under Regulation D promulgated under the Securities Act, or otherwise as a “qualified purchaser” as that term is defined in Regulation A promulgated under the Securities Act, or as may be required by the securities administrators or regulators of any state, to confirm that the Subscriber meets any applicable minimum financial suitability standards and has satisfied any applicable maximum investment limits.
15.2 Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of each of the parties hereto.

15.3 The parties agree to execute and deliver such further documents and information as may be reasonably required in order to effectuate the purposes of this Agreement.
15.4 The Subscriber acknowledges and agrees that it will provide additional information or take such other actions as may be necessary or advisable for the Flora Parties (in the sole and absolute judgment of such party or parties) to comply with any disclosure and compliance policies, related legal process or appropriate requests (whether formal or informal), tax reporting and/or withholding requirements or otherwise.
16. Termination.
16.1 In addition to any other event or development described in this Agreement as permitting or requiring termination, each of the following events will cause this Agreement to terminate and expire:
16.1.1 At the discretion of the Company, any breach of any provision of this Agreement (including, without limitation, through any inaccuracy, omission, or incompleteness of a representation or warranty of the Subscriber in this Agreement); and/or
16.1.2 At the discretion of the Company, any determination by the Company that the Subscription in any way results in a material violation of applicable law.
16.2 In the event of termination, Sections 5 (Rights to Use Subscriber Information), 6 (Relationship between Subscriber and the Flora Parties), 10 (Transfer and Storage of Personal Data), 11 (Consent to Electronic Delivery of Notices, Disclosures and Forms), 13 (Limitations on Damages), 14 (Arbitration), 16 (Termination), and 17 (Miscellaneous Provisions) shall survive.
16.2.1 Upon delivery of the Securities to Subscriber pursuant to this Agreement, Subscriber’s obligations, pursuant to the Subscriber Questionnaire and Section 4 of this Agreement, to inform the Company of any changes in any statements made in this Agreement, shall terminate with respect to any such changes that relate solely to the period after the delivery of the Securities.
17. Miscellaneous Provisions.
17.1 Governing Law; Consent to Jurisdiction; Venue and Service of Process.  Notwithstanding the place where this Agreement may be executed by any of the parties hereto, the parties expressly agree that all the terms and provisions hereof shall be construed under the laws of the State of Delaware.  To the extent permissible under applicable law, the Subscriber hereby irrevocably agrees that any suit, action or proceeding (“Action”) with respect to this Agreement may, but need not, be resolved, whether by arbitration or otherwise, within the State of New York.  Accordingly, the parties consent and submit to the non-exclusive jurisdiction of the federal and state courts.  The Subscriber agrees and consents that service of process as provided by U.S. federal and Delaware state law may be made upon the Subscriber in any such Action brought in any of said courts, and may not claim that any such suit, action or proceeding has been brought in an inconvenient forum.  Notwithstanding the foregoing or anything to the contrary, the Subscriber and Company agree that no provisions under federal laws and regulations, including the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, respective to jurisdiction, venue and/or forum, shall be waived.
17.2 E-Mail Communications.  All notices and communications to be given or otherwise made to the Subscriber shall be deemed to be sufficient if sent by e-mail to such address provided by the Subscriber via the Site.  Unless otherwise specified in this Agreement, Subscriber shall send all notices or other communications required to be given hereunder to the Company via e-mail at info@floragrowth.ca.  Any such notice or communication shall be deemed to have been delivered and received on the first business day following that on which the e-mail has been sent (assuming that there is no error in delivery).  As used in this Section 17.2, “business day” shall mean any day other than a day on which banking institutions in the State of New York or the City of Toronto, in the Province of Ontario, are legally closed for business.
17.3 Assignability.  This Agreement, or the rights, obligations or interests of the Subscriber hereunder, may not be assigned, transferred or delegated without the prior written consent of the Company.  Any such assignment, transfer or delegation in violation of this Section 17.3 shall be null and void.

17.4 Severability.  If any provision of this Agreement is invalid or unenforceable under any applicable law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such applicable law.  Any provision hereof that may be held invalid or unenforceable under any applicable law shall not affect the validity or enforceability of any other provisions hereof, and to this extent the provisions hereof shall be severable.
17.5 Reimbursement of Costs Related to an Action.  In the event that either party hereto shall commence any suit, action or other proceeding to interpret this Agreement, or determine to enforce any right or obligation created in this Agreement, then such party, if it prevails in such action, shall recover its reasonable costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorney’s fees and expenses and costs of appeal, if any.
17.6 Entire Agreement.  This Agreement (including the exhibits and schedules attached to this Agreement) and the documents referred to in this Agreement constitute the entire agreement among the parties and shall constitute the sole documents setting forth terms and conditions of the Subscriber’s contractual relationship with the Company with regard to the matters set forth in this Agreement.  This Agreement supersedes any and all prior or contemporaneous communications, whether oral, written or electronic, between the Company and the Subscriber.  Irrespective of the foregoing, the Subscriber and the Company may enter into a separate agreement for each of Subscriber’s purchase in the general offering and the voucher program, as such terms are defined in the Offering Circular, as applicable.
17.7 Third-Party Beneficiaries.  The parties acknowledge that there are no third-party beneficiaries of this Agreement, except for any affiliates of the Company that may be involved in the issuance or servicing of the Securities on the Site, which the parties expressly agree shall be third-party beneficiaries hereof.
17.8 Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
[Signature Page to Follow]


E-SIGNATURE PAGE
 By checking this box and clicking the “I Agree” button, I agree to comply with and be bound by all terms of this Agreement.  I acknowledge and accept that all purchases of the Securities under this Agreement are final, and there are no refunds or cancellations except as may be required by this Agreement, applicable law or regulation.  I further acknowledge and accept that the Company reserves the right to refuse, cancel or accept or, subject to Section 16, cancel this Agreement at any time in its sole discretion.
Entity Name:
[ENTITY NAME] 
By:
/s/ [SIGNATORY NAME] 
Name:
[SIGNATORY NAME] 
Title:
[SIGNATORY TITLE] 
Submission Date:
[INVESTMENT SIGN DATE] 
Total Purchase Amount:
$[PURCHASE AMOUNT] 
Number of General Sale _______:
 
AGREED AND ACCEPTED BY
THE COMPANY:
_______
 
By:
 
Name:
 
Title:
 
Effective Date:
[EFFECTIVE DATE] 
_______
_______
_______
_______
 

EXHIBIT A
WARRANT

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN QUALIFIED PURSUANT TO REGULATION A OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) AND ARE EXEMPT FROM REGISTRATION UNDER STATE SECURITIES LAWS.  THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT UNLESS SUCH SECURITIES ARE REGISTERED OR CONTINUE TO BE QUALIFIED PURSUANT TO REGULATION A UNDER THE U.S. SECURITIES ACT, SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY PURSUANT TO OTHER EXEMPTIONS FROM THE U.S. SECURITIES ACT AND STATE SECURITIES LAWS.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [THE DISTRIBUTION DATE]; AND (II) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.
THE WARRANTS REPRESENTED HEREBY WILL BE VOID AND OF NO VALUE AFTER 5:00 PM (ONTARIO TIME) ON _______________, 202_.
FLORA GROWTH CORP.
(an Ontario corporation)
 Certificate Number: __
 
 **______** Warrants to Purchase
 
 
 **_____** Shares
COMMON SHARE PURCHASE WARRANTS
THIS IS TO CERTIFY THAT, for value received, ____________ or his lawful assignee (the “Holder”) is entitled to subscribe for and purchase up to ____________ (______) fully paid and non-assessable common shares without par value (collectively the “Shares” and individually, a “Share”) in the capital of Flora Growth Corp. (the “Company”) at any time on or before 5:00 p.m. Ontario time on _____, 20__, which is eighteen months from the date hereof (the “Expiry Date”), at a price of US$1.00 per Share (the “Exercise Price”), subject, however, to the provisions and upon the Terms and Conditions attached hereto as Schedule “A.”
The rights represented by this Warrant Certificate may be exercised by the Holder, in whole or in part (but not as to a fraction of a Share) by surrender of this Warrant Certificate (properly endorsed as required), together with a Warrant Exercise Form (as such term is defined in Schedule “A”) in the form attached hereto as Appendix “B”, duly completed and executed, to the Company at 65 Queen Street West, Suite 800, Toronto, Ontario, Canada M5H 2M5 (Attention: Chief Financial Officer), or such other address as the Company may from time to time in writing direct, together with a certified cheque or bank draft payable to or to the order of the Company in payment of the Exercise Price of the number of Shares subscribed for.  The Holder is advised to read “Instruction to Holders” attached hereto as Appendix “A” for details on how to complete the Warrant Exercise Form.
1

IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be executed by its duly authorized officer, this ___ day of ________, 20__.
FLORA GROWTH CORP.
Per:  
 Authorized Signatory
2


SCHEDULE “A”
TERMS AND CONDITIONS
ATTACHED TO COMMON SHARE PURCHASE WARRANTS
ISSUED BY FLORA GROWTH CORP.
(the “Company”)
Each Warrant of the Company, whether single or part of a series, is subject to these Terms and Conditions as they were at the date of issue of the Warrant.
PART 1

DEFINITIONS AND INTERPRETATION
Definitions
1.1 In these Terms and Conditions, except as otherwise expressly provided herein, the following words and phrases will have the following meanings:
(a)
Company” means Flora Growth Corp. and includes any successor corporations;
(b)
Company’s auditor” means the accountant duly appointed as auditor of the Company;
(c)
Exercise Price” means US$1.00 per Share or as may be adjusted as per Part 5;
(d)
Expiry Date” means the date defined as such on the face page of the Warrant Certificate;
(e)
Expiry Time” means 5:00 p.m. Ontario time on the Expiry Date;
(f)
Holder” means the registered holder of a Warrant;
(g)
Joint Actors” has the meaning ascribed thereto in §7.1;
(h)
person” means an individual, corporation, partnership, trustee or any unincorporated organization, and words importing persons have a similar meaning;
(i)
Shares” or “shares” means the common shares in the capital of the Company as constituted at the date of issue of a Warrant and any shares resulting from any event referred to in Part 5;
(j)
Warrant” means a warrant as evidenced by the certificate, one Warrant entitles the holder to purchase one (1) common share of the Company (subject to adjustment) on or before the Expiry Date at the Exercise Price set forth on the Warrant Certificate;
(k)
Warrant Certificate” means the certificate evidencing the Warrant;
(l)
Warrant Exercise Form” means Appendix “B” hereof; and
(m)
            “Warrant Transfer Form” means Appendix “C” hereof.
1

Interpretation
1.2 In these Terms and Conditions, except as otherwise expressly provided herein:
(a)
the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to these Terms and Conditions as a whole and not to any particular Part, clause, subclause or other subdivision;
(b)
a reference to a Part means a Part of these Terms and Conditions and the symbol § followed by a number or some combination of numbers and letters refers to the section, paragraph or subparagraph of these Terms and Conditions so designated;
(c)
the headings are for convenience only, do not form a part of these Terms and Conditions and are not intended to interpret, define or limit the scope, extent or intent of these Terms and Conditions or any of its provisions;
(d)
all dollar amounts referred to herein are expressed in United States funds;
(e)
time will be of the essence hereof; and
(f)
words importing the singular number include the plural and vice versa, and words importing the masculine gender include feminine and neuter genders.
Applicable Law
1.3 The Warrants will be construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and will be treated in all respects as legal contracts under the laws of the Province of Ontario and the federal laws of Canada applicable therein.
PART 2

ISSUE OF WARRANTS
Additional Warrants
2.1 The Company may at any time and from time to time issue Warrants or grant options or similar rights to purchase shares of in its capital.
Issue in Substitution for Lost Warrants
2.2 In case a Warrant Certificate will become mutilated, lost, destroyed or stolen, the Company in its discretion may issue and deliver a new Warrant Certificate of like date and tenor as the one mutilated, lost, destroyed or stolen in exchange for, and in place of, and upon cancellation of such mutilated Warrant Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Warrant Certificate, and the Warrants represented by such substituted Warrant Certificate will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants of the same issue.  The Company may charge a reasonable fee for the issuance and delivery of a new Warrant Certificate.
2.3 The applicant for the issue of a new Warrant Certificate pursuant hereto will bear the cost of the issue thereof and in the case of loss, destruction or theft furnish to the Company such evidence of ownership, and of loss, destruction or theft of the Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company in its discretion; and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion and will pay the reasonable charges of the Company in connection therewith.
2

Holder not a Shareholder
2.4 The holding of a Warrant will not constitute the Holder a shareholder of the Company, nor entitle the Holder to any right or interest in respect thereof, except as expressly provided in the Warrant Certificate.
Canadian Securities Law Exemption
2.5 The Holder acknowledges and agrees that the Warrants and any Shares issued pursuant to the exercise of any Warrants have been or will be issued only on a “private placement” basis and that the Company has no obligation to, and does not intend to, file any prospectus or registration statement in any jurisdiction in order to qualify any of such Warrants and/or Shares for resale.
U.S. Securities Law Matters
2.6 The Warrants and Shares are being offered pursuant to Regulation A pursuant to Section 3(b) of the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and exemptions under state securities laws.  These Warrants may not be exercised in the United States or by or on behalf of, or for the account or benefit of, a U.S. person or a person in the United States unless the Shares issuable upon exercise of the Warrants have been purchased by purchasers who satisfy the requirements set forth in Regulation A and applicable state securities laws.  Certificates representing Shares issued in the United States or to U.S. persons will bear a legend restricting the transfer and exercise of such securities under applicable United States federal and state securities laws unless such Shares have been registered or qualified under the U.S. Securities Act and the applicable state securities legislation.  “United States” and “U.S. person” are as defined in Regulation S under the U.S. Securities Act.
PART 3

OWNERSHIP AND TRANSFER OF WARRANT
Exchange of Warrants
3.1 A Warrant Certificate in any authorized denomination, upon compliance with the reasonable requirements of the Company, may be exchanged for a Warrant Certificate(s) in any other authorized denomination of the same issue entitling the Holder to purchase an equal aggregate number of Shares at the same Exercise Price and on the same terms as the Warrant Certificate so exchanged.
3.2 Warrants may be exchanged only with the Company.  Any Warrants tendered for exchange will be surrendered to the Company and cancelled.
3.3 The Warrants are transferable on the terms and conditions contained herein and by the Holder completing and submitting to the Company a completed and duly executed Warrant Transfer Form.
Charges for Exchange
3.4 On exchange of Warrants, the Company, except as otherwise herein provided, may charge a reasonable fee for each new Warrant Certificate issued, and payment of any transfer taxes or governmental or other charges required to be paid will be made by the party requesting such exchange.
3

Ownership of Warrants
3.5 The Company may deem and treat the Holder of a Warrant as the absolute owner of such Warrant for all purposes and will not be affected by any notice or knowledge to the contrary.
Notice to Holder
3.6 Unless herein otherwise expressly provided, any notice to be given hereunder to a Holder will be deemed to be validly given, if mailed to the address of the Holder as set out on the Warrant Certificate.  Any notice so given will be deemed to have been received five days from the date of mailing to the Holder or any market intermediary then holding the Warrants of the Holder in any trust account.
PART 4

EXERCISE OF WARRANTS
Method of Exercise of Warrants
4.1 The right to purchase Shares conferred by a Warrant may be exercised by the Holder surrendering the Warrant Certificate, together with a duly completed and executed Warrant Exercise Form and a certified cheque or bank draft payable to, or to the order of Company at the address as set out on the Warrant Certificate, for the Exercise Price applicable at the time of surrender in respect of the shares subscribed for in lawful money of the United States to the Company at the address as set out on the Warrant Exercise Form.
Effect of Exercise of Warrants
4.2 Upon surrender and payment as aforesaid, the shares so subscribed for will be deemed to have been issued, and the Holder will be deemed to have become the holder of such shares on the date of such surrender and payment, and such shares will be issued at the Exercise Price as may be adjusted in the events and in the manner described herein.
4.3 Within 10 business days after surrender and payment as aforesaid, the Company will forthwith cause to be delivered to the person in whose name the shares are directed to be registered as specified in such Warrant Exercise Form, or if no such direction is given, the Holder, a certificate for the appropriate number of shares not exceeding those which the Holder is entitled to purchase pursuant to the Warrant Certificate surrendered.
Subscription for Less than Entitlement
4.4 A Holder may purchase a number of shares less than the number which the Holder is entitled to purchase pursuant to the surrendered Warrant Certificate.  In the event of any purchase of a number of shares less than the number which can be purchased pursuant to a Warrant Certificate, the Holder, upon exercise thereof, will, in addition to certificates representing shares issued on such exercise, be entitled to receive a new Warrant Certificate in respect of the balance of the shares which the Holder was entitled to purchase pursuant to the surrendered Warrant Certificate but which were not then purchased.
4

Expiration of Warrants
4.5 After the Expiry Date, all rights under the Warrants will wholly cease and terminate, and the Warrants will thereupon be void and of no effect.
Exercise Price
4.6 The price per share which must be paid to exercise a Warrant is the Exercise Price, as may be adjusted in the events and in the manner described herein.
Legends on Shares
4.7 In addition to the other legends that may be required hereunder, the certificates representing Shares issued upon exercise of Warrants will bear the following legend:
“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [THE DISTRIBUTION DATE OF THE WARRANTS], AND (II) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.;
provided that at any time subsequent to the date which is four months and one day after the later of (i) [the distribution date of the Warrants], and (ii) the date the Company became a reporting issuer in any province or territory, any certificate representing such Shares may be exchanged for a certificate bearing no such legends.
4.8 U.S. Legends:  Unless the Shares have been registered or continue to be qualified under the U.S. Securities Act, pursuant to Regulation A, and the applicable state securities legislation or an exemption from such registration requirements is available, any Shares issued upon exercise of these Warrants in the United States, or to or for the account or benefit of a U.S. person (as such term is defined in Rule 902(k) of Regulation S under the U.S. Securities Act) or a person in the United States, will be “restricted securities”, as defined in Rule 144(a)(3) under the U.S. Securities Act.  The certificates representing any such Shares which are deemed to be “restricted securities”, as well as all certificates issued in exchange or in substitution therefor, until such time as is no longer required under the applicable requirements of the U.S. Securities Act, or applicable state securities laws, will bear, on the face of such certificate, the following legend:
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY; (B) TO NON-“U.S. PERSONS” (AS DEFINED IN RULE 902 OF REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS; (C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 PROMULGATED THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS; OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, AND, IN THE CASE OF CLAUSE (C) OR (D), THE SELLER FURNISHES TO THE COMPANY AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY TO SUCH EFFECT.  THE PRESENCE OF THIS LEGEND MAY IMPAIR THE ABILITY OF THE HOLDER HEREOF TO EFFECT “GOOD DELIVERY” OF THE SECURITIES REPRESENTED HEREBY ON A CANADIAN STOCK EXCHANGE.”
5

provided, that, if the Shares are being sold outside the United States in compliance with the requirements of Rule 904 of Regulation S and the Company is a “foreign issuer” (as defined in Rule 902 of Regulation S) at the time of original sale or issuance of such Shares, the legends set forth above in this §4.9 may be removed by providing a declaration to the registrar and transfer agent of the Company in a form as the Company may prescribe from time to time; and provided, further, that, if the Shares are being sold otherwise than in accordance with Rule 904 of Regulation S and other than to the Company, the legends may be removed by delivery to the registrar and transfer agent and the Company of an opinion of counsel of recognized standing in form and substance satisfactory to the Company that such legends are no longer required under applicable requirements of the U.S. Securities Act or state securities laws.  Provided further, for the sake of clarity, the legend above shall not be required in the event that the Shares continue to be qualified under Regulation A of the U.S. Securities Act.
PART 5

ADJUSTMENTS
Adjustments
5.1 If and whenever the Shares will be subdivided into a greater or consolidated into a lesser number of shares, or in the event of any payment by the Company of a stock dividend (other than a dividend paid in the ordinary course), or in the event that the Company conducts a rights offering to its shareholders, the exercise price will be decreased or increased proportionately as the case may be.  Upon any such subdivision, consolidation, payment of a stock dividend or rights offering, the number of shares deliverable upon the exercise of a Warrant and the exercise price of the Warrant will be increased or decreased proportionately as the case may be.
5.2 In case of any reclassification of the capital of the Company, or in the case of the merger, reorganization or amalgamation of the Company with, or into any other company or of the sale of substantially all of the property and assets of the Company to any other company, each Warrant will, after such reclassification of capital, merger, amalgamation or sale, confer the right to purchase that number of shares or other securities or property of the Company or of the company resulting from such reclassification, merger, amalgamation, or to which such sale will be made, as the case may be, which the Holder would then hold if the Holder had exercised the Holder’s rights under the Warrant before reclassification of capital, merger, amalgamation or sale; and in any such case, if necessary, appropriate adjustments will be made in the application of the provisions set forth in this Part 5 with respect to the rights and interest thereafter of the Holders to the end that the provisions set forth in this Part 5 will thereafter correspondingly be made applicable as nearly as may reasonably be in relation to any Shares or other securities or property thereafter deliverable on the exercise of a Warrant.
5.3 The adjustments provided for in this Part 5 are cumulative.
Determination of Adjustments
5.4 If any question will at any time arise with respect to any adjustments to be made under §5.1 and §5.2, such question will be conclusively determined by the Company’s auditor, or, if the Company’s auditor declines to so act, any other chartered accountant in the Province of Ontario that the Company may designate (acting reasonably) and who will have access to all appropriate records, and such determination will be binding upon the Company and the Holder.
6

Hold Period
5.5 The Shares received by the Holder upon the exercise of the Warrants is subject to a hold period as determined by the Securities Act (Ontario).  There may be further restrictions on resale in accordance with the requirements of any exchange, including the Canadian Securities Exchange or the TSX Venture Exchange, should the Company ever list on such an exchange, which listing may not occur, and/or other applicable securities laws.
PART 6

COVENANTS BY THE COMPANY
Reservation of Shares
6.1 The Company will reserve, and there will remain unissued out of its authorized capital, a sufficient number of shares to satisfy the rights of purchase provided for in all Warrants from time to time outstanding.
Securities Qualification Requirements
6.2 If, in the opinion of counsel for the Company, any prospectus or other filing is required to be filed with or any permission is required to be obtained from any securities regulatory body or any other step is required under any federal or provincial law before any shares which the Holder is entitled to purchase pursuant to the Holder’s Warrant may properly and legally be issued upon exercise thereof, the Company covenants that it will take such action.
PART 7

RESTRICTION ON EXERCISE
Blocking Language
7.1 Notwithstanding anything contained herein to the contrary, the rights represented by this Warrant Certificate will not be exercisable by the Holder, in whole or in part, and the Company will not give effect to any such exercise, if, after giving effect to such exercise, the Holder, together with any person or company acting jointly or in concert with the Holder (the “Joint Actors”) would in the aggregate beneficially own, or exercise control or direction over that number of voting securities of the Company which is twenty percent (20%) or greater of the total issued and outstanding voting securities of the Company, immediately after giving effect to such exercise. For greater certainty, the rights represented by this Warrant Certificate will not be exercisable by the Holder, in whole or in part, and the Company will not give effect to any such exercise, if, after giving effect to such exercise, the Holder, together with its Joint Actors, would be deemed to hold a number of voting securities sufficient to materially affect the control of the Company.
7.2 Notwithstanding any provision to the contrary contained herein, no Shares will be issued pursuant to the exercise of any Warrant if the issuance of such securities would constitute a violation of the securities laws of any applicable jurisdiction, and the certificates evidencing the Shares thereby issued may bear such legend as may, in the opinion of legal counsel to the Company, be necessary in order to avoid a violation of any securities laws of any applicable jurisdiction or to comply with the requirements of any stock exchange on which the Shares of the Company are listed, provided that, at any time, in the opinion of legal counsel to the Company, such legends are no longer necessary in order to avoid a violation of any such laws, or the holder of any such legended certificate, at that holder's expense, provides the Company with evidence satisfactory in form and substance to the Company (which may include an opinion of legal counsel satisfactory to the Company) to the effect that such holder is entitled to sell or otherwise transfer such Shares in a transaction in which such legends are not required, such legended certificate may thereafter be surrendered to the Company in exchange for a certificate which does not bear such legend.
7

PART 8

MODIFICATION OF TERMS, SUCCESSORS
Modification of Terms and Conditions for Certain Purposes
8.1 From time to time the Company may, subject to the provisions of the Warrant Certificate, when so directed by the Holders, modify the terms and conditions hereof, for any one or more or all of the following purposes:
(a)
adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of counsel for the Company, are necessary or advisable in the circumstances;
(b)
making such provisions not inconsistent herewith as may be necessary or desirable with respect to matters or questions arising hereunder or for the purpose of obtaining a listing or quotation of Warrants on any stock exchange or house;
(c)
adding to or altering the provisions hereof in respect of the registration of Warrants making provision for the exchange of Warrant Certificates of different denominations; and making any modification in the form of Warrant Certificates which does not affect the substance thereof;
(d)
for any other purpose not inconsistent with the terms hereof, including the correction or rectification of any ambiguities, defective provisions, errors or omissions herein; and
(e)
to evidence any succession of any corporation and the assumption by any successor of the covenants of the Company herein and in the Warrants contained as provided hereafter in this Part 8.
Company may Amalgamate on Certain Terms
8.2 Nothing herein contained will prevent any amalgamation or merger of the Company with or into any other company, or the sale of the property or assets of the Company to any company lawfully entitled to acquire the same; provided however that the company formed by such merger or amalgamation or which acquires by conveyance or transfer all or substantially all the properties and assets of the Company will be a company organized and existing under the laws of Canada or of the United States or any Province, State, District or Territory thereof, which will, simultaneously with such amalgamation, merger, conveyance or transfer, assume the due and punctual performance and observance of all the covenants and conditions hereof to be performed or observed by the Company and will succeed to and be substituted for the Company, and such changes in phraseology and form (but not in substance) may be made in the Warrant Certificate as may be appropriate in view of such amalgamation, merger or transfer.
Additional Financings
8.3 Nothing herein contained will prevent the Company from issuing any other securities or rights with respect thereto during the period within which a Warrant is exercisable, upon such terms as the Company may deem appropriate.
[End of Schedule “A”]
8


APPENDIX “A”
INSTRUCTIONS TO HOLDERS
TO EXERCISE:
To exercise Warrants, the Holder must complete, sign and deliver the Warrant Exercise Form, attached as Appendix “B” and deliver the Warrant Certificate(s) to the Company, indicating the number of common shares in the capital of the Company to be acquired.
TO TRANSFER:
To transfer Warrants, the Holder must complete, sign and deliver the Warrant Transfer Form, attached as Appendix “C” and deliver the Warrant Certificate(s) to the Company.  The Company may require such other certificates or opinions to evidence compliance with applicable securities legislation in Canada and the United States.
To transfer Warrants, the Holder's signature on the Warrant Transfer Form must be guaranteed by an authorized officer of a chartered bank, trust company or an investment dealer who is a member of a recognized stock exchange.
GENERAL:
If forwarding any documents by mail, registered mail must be employed.
If the Warrant Exercise Form is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a fiduciary or representative capacity, the Warrant Certificate must also be accompanied by evidence of authority to sign satisfactory to the Company.
The address of the Company is:
Flora Growth Corp.
65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5
Attention: Chief Financial Officer
Telephone: +1 (416) 861 - 2267

[End of Appendix “A”]


APPENDIX “B”
WARRANT EXERCISE FORM
TO:        Flora Growth Corp.
65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5
Attention: Chief Financial Officer
Telephone: +1 (416) 861 - 2267
The undersigned Holder of the within Warrants hereby subscribes for ____________ common shares (the “Shares”) of FLORA GROWTH CORP. (the “Company”) pursuant to the within Warrants on the terms and price specified in the Warrants.  This subscription is accompanied by a certified cheque or bank draft payable to or to the order of the Company for the whole amount of the purchase price of the Shares.
The undersigned hereby directs that the Shares be registered as follows:

NAME(S) IN FULL
ADDRESS(ES)
NUMBER OF SHARES
     
     

Unless the Shares have been registered or qualified under the U.S. Securities Act, including without limitation Regulation A, and the applicable state securities legislation, as at the time of exercise hereunder, the undersigned Holder represents, warrants and certifies as follows (check one):

(A) 
the undersigned Holder at the time of exercise of the Warrant is not in the United States, is not a “U.S. person” as defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and is not exercising the Warrant for the account or benefit of a U.S. person or a person in the United States (as defined in Regulation S), and did not execute or deliver this exercise form in the United States; OR

(B) 
the undersigned Holder is resident in the United States, is a U.S. person, or is exercising the Warrant for the account or benefit of a U.S. person or a person in the United States (a “U.S. Holder”), and is an “accredited investor”, as defined in Rule 501(a) of Regulation D under the U.S. Securities Act (a “U.S. Accredited Investor”), and has completed the U.S. Accredited Investor Status Certificate in the form attached to this exercise form; OR

(C) 
if the undersigned Holder is a U.S. Holder, the undersigned Holder has delivered to the Company and the Company’s transfer agent an opinion of counsel (which will not be sufficient unless it is in form and substance satisfactory to the Company) or such other evidence satisfactory to the Company to the effect that with respect to the Shares to be delivered upon exercise of the Warrant, the issuance of such securities has been qualified pursuant to Regulation A under the U.S. Securities Act and applicable state securities laws, or an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available.

Note:  Unless the Shares have been registered or qualified under the U.S. Securities Act and the applicable state securities legislation certificates representing Shares will not be registered or delivered to an address in the United States unless box (B) or (C) immediately above is checked.
If the undersigned Holder has indicated that the undersigned Holder is a U.S. Accredited Investor by marking box (B) above, the undersigned Holder additionally represents and warrants to the Company that:

1
the undersigned Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares, and the undersigned is able to bear the economic risk of loss of his or her entire investment;

2.
the undersigned is: (i) purchasing the Shares for his or her own account or for the account of one or more U.S. Accredited Investors with respect to which the undersigned is exercising sole investment discretion, and not on behalf of any other person; (ii) is purchasing the Shares for investment purposes only and not with a view to resale, distribution or other disposition in violation of United States federal or state securities laws; and (iii) in the case of the purchase by the undersigned of the Shares as agent or trustee for any other person or persons (each a “Beneficial Owner”), the undersigned Holder has due and proper authority to act as agent or trustee for and on behalf of each such Beneficial Owner in connection with the transactions contemplated hereby; provided that: (x) if the undersigned Holder, or any Beneficial Owner, is a corporation or a partnership, syndicate, trust or other form of unincorporated organization, the undersigned Holder or each such Beneficial Owner was not incorporated or created solely, nor is it being used primarily to permit purchases without a prospectus or registration statement under applicable law; and (y) each Beneficial Owner, if any, is a U.S. Accredited Investor; and

3.
the undersigned has not exercised the Warrants as a result of any form of general solicitation or general advertising (as such terms are used in Rule 502 of Regulation D under the U.S. Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, television, the Internet or other form of telecommunications, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.
If the undersigned has indicated that the undersigned is a U.S. Accredited Investor by marking box (B) above, the undersigned also acknowledges and agrees that:

1.
the Company has provided to the undersigned the opportunity to ask questions and receive answers concerning the terms and conditions of the offering, and the undersigned has had access to such information concerning the Company as the undersigned has considered necessary or appropriate in connection with the undersigned’s investment decision to acquire the Shares;

2


2.
if the undersigned decides to offer, sell or otherwise transfer any of the Shares, the undersigned must not, and will not, offer, sell or otherwise transfer any of such Shares directly or indirectly, unless:

(a)
the sale is to the Company;

(b)
the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations;

(c)
the sale is made pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder, if available, and in accordance with any applicable state securities or “blue sky” laws; or

(d)
the Shares are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities,
and in the case of (c) or (d) above, it has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company;

3.
the Shares are “restricted securities” under applicable federal securities laws and that the U.S. Securities Act and the rules of the United States Securities and Exchange Commission provide in substance that the undersigned may dispose of the Shares only pursuant to an effective registration statement under the U.S. Securities Act or an exemption therefrom;

4.
the Company has no obligation to register any of the Shares or to take action so as to permit sales pursuant to the U.S. Securities Act (including Rule 144 thereunder);

5.
the certificates representing the Shares (and any certificates issued in exchange or substitution for the Shares) will bear a legend stating that such securities have not been registered under the U.S. Securities Act or the securities laws of any state of the United States, and may not be offered for sale or sold unless registered under the U.S. Securities Act and the securities laws of all applicable states of the United States, or unless an exemption from such registration requirements is available;

6.
the legend may be removed by delivery to the registrar and transfer agent of the Company and the Company of an opinion of counsel, reasonably satisfactory to the Company, that such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws;

7.
there may be material tax consequences to the undersigned of an acquisition or disposition of the Shares;

8.
the Company gives no opinion and makes no representation with respect to the tax consequences to the undersigned under United States, state, local or foreign tax law of the undersigned’s acquisition or disposition of any Shares; in particular, no determination has been made whether the Company will be a “passive foreign investment company” (commonly known as a “PFIC”) within the meaning of Section 1297 of the United States Internal Revenue Code;

3


9.
funds representing the exercise price for the Shares which will be advanced by the undersigned to the Company upon exercise of the Warrants will not represent proceeds of crime for the purposes of the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”), and the undersigned acknowledges that the Company may in the future be required by law to disclose the undersigned’s name and other information relating to this exercise form and the undersigned’s subscription hereunder, on a confidential basis, pursuant to the PATRIOT Act.  No portion of the exercise price to be provided by the undersigned (i) has been or will be derived from or related to any activity that is deemed criminal under the laws of the United States, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity who has not been identified to or by the undersigned, and it shall promptly notify the Company if the undersigned discovers that any of such representations ceases to be true and provide the Company with appropriate information in connection therewith; and

10.
the undersigned consents to the Company making a notation on its records or giving instructions to any transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this subscription form.
In the absence of instructions to the contrary, the securities or other property will be issued in the name of or to the Holder hereof and will be sent by first class mail to the last address of the Holder appearing on the register maintained for the Warrants.
 DATED this _________ day of _______________, 20_____.
 

 In the presence of:
 
 
 
 
 
 
 
 
Signature of Witness
 
Signature of Holder
 
 
 
 
 
 
Witness’s Name
 
Name and Title of Authorized Signatory
for the Holder

 
 
 
 Please print below your name and address in full.
 
 
 
 Legal Name
 
 
 
 
 
 Address
 
 
4

INSTRUCTIONS FOR SUBSCRIPTION
The signature to the subscription must correspond in every particular with the name written upon the face of the Warrant Certificate without alteration.  If the registration in respect of the certificates representing the Shares to be issued upon exercise of the Warrants differs from the registration of the Warrant Certificates the signature of the registered holder must be guaranteed by an authorized officer of a Canadian chartered bank, or of a major Canadian trust company, or by a medallion signature guarantee from a member recognized under the Signature Medallion Guarantee Program, or from a similar entity in the United States, if this transfer is executed in the United States, or in accordance with industry standards.
In the case of persons signing by agent or attorney or by personal representative(s), the authority of such agent, attorney or representative(s) to sign must be proven to the satisfaction of the Company.
If the Warrant Certificate and the form of subscription are being forwarded by mail, registered mail must be employed.

5


U.S. ACCREDITED INVESTOR STATUS CERTIFICATE
In connection with the exercise of certain outstanding warrants of FLORA GROWTH CORP. (the “Company”) by the Holder, the Holder hereby represents and warrants to the Company that the Holder, and each beneficial owner (each a “Beneficial Owner”), if any, on whose behalf the Holder is exercising such warrants, satisfies one or more of the following categories of Accredited Investor (please write “W/H” for the undersigned Holder, and “B/O” for each beneficial owner, if any, on each line that applies):
_______ (1)
Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; any investment company registered under the U.S. Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the U.S. Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the U.S. Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are “accredited investors” (as such term is defined in Rule 501 of Regulation D of the U.S. Securities Act);
_______ (2)
Any private business development company as defined in Section 202(a)(22) of the U.S. Investment Advisers Act of 1940;
_______ (3)
Any organization described in Section 501(c)(3) of the U.S. Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000;
_______ (4)
Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment);


_______ (5)
A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of purchase, exceeds US$1,000,000 (for the purposes of calculating net worth, (i) the person’s primary residence shall not be included as an asset; (ii) indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of this certification, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of this certification exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (iii) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence shall be included as a liability);
_______ (6)
A natural person who had annual gross income during each of the last two full calendar years in excess of US$200,000 (or together with his or her spouse in excess of US$300,000) and reasonably expects to have annual gross income in excess of US$200,000 (or together with his or her spouse in excess of US$300,000) during the current calendar year, and no reason to believe that his or her annual gross income will not remain in excess of US$200,000 (or that together with his or her spouse will not remain in excess of US$300,000) for the foreseeable future;
_______ (7)
Any director or executive officer of the Company; or
_______ (8)
Any entity in which all of the equity owners meet the requirements of at least one of the above categories (if this alternative is selected you must identify each equity owner and provide statements for each demonstrating how they qualify as an accredited investor).
__________


[End of Appendix “B”]
2




APPENDIX “C”
WARRANT TRANSFER FORM

TO:        Flora Growth Corp.
65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5
Attention: Chief Financial Officer
Telephone: +1 (416) 861 - 2267

FOR VALUE RECEIVED, the undersigned holder of the within Warrants hereby sells, assigns and transfers to _______________________________, ________________ Warrants of Flora Growth Corp. (the “Company”) registered in the name of the undersigned on the records of the Company and irrevocably appoints ________________ the attorney of the undersigned to transfer the said securities on the books or register with full power of substitution.

The undersigned hereby directs that the Warrants hereby transferred be issued and delivered as follows:
NAME IN FULL
ADDRESS
NUMBER OF WARRANTS
 


   


DATED this _________ day of _______________, 20____.

     
Signature of Warrant Holder
 
Signature Guaranteed

INSTRUCTIONS FOR TRANSFER

Signature of the Holder must be the signature of the person appearing on the face of this Warrant Certificate.

If the Transfer Form is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a fiduciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Company.

The signature on the Transfer Form must be guaranteed by a chartered bank or trust company, or a member firm of an approved signature guarantee medallion program.  The guarantor must affix a stamp bearing the actual words: “SIGNATURE GUARANTEED”.
3


The Warrants will only be transferable in accordance with applicable laws.  The Warrants and the common shares in the capital of the Company issuable upon exercise thereof have been qualified pursuant to Regulation A under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and under the securities laws of the applicable states of the United States.  The Warrants and the common shares may not be transferred to or for the account or benefit of a U.S. person or any person in the United States without registration or qualification under Regulation A under the U.S. Securities Act and applicable state securities laws, or compliance with the requirements of an exemption from registration.  “United States” and “U.S. person” are as defined in Regulation S under the U.S. Securities Act.

[End of Appendix “C”]



4

INDEPENDENT CONTRACTOR AGREEMENT

THIS AGREEMENT is made as of the 14th day of March, 2019

BETWEEN:

FLORA GROWTH CORP., a body corporate duly incorporated under the laws of the Province of Ontario

(hereinafter called the “Company”)
                              OF THE FIRST PART
AND:

FORBES & MANHATTAN, INC.,  a body corporate duly incorporated under the laws of the Province of Ontario

(hereinafter called the “Consultant”)

         OF THE SECOND PART

FOR VALUABLE CONSIDERATION it is hereby agreed as follows:

1. The Consultant shall provide consulting services to the Company. The Consultant shall serve the Company (and/or such subsidiary or subsidiaries of the company as the Company may from time to time require) in such consulting capacity or capacities as may from time to time be determined by resolution of the Board of Directors of the Company acting reasonably and shall perform such duties and exercise such powers as may from time to time be determined by resolution of the Board of Directors, as an independent contractor.

2. The term of this Agreement shall be from the date hereof and shall continue until terminated in accordance with the termination provisions herein.

3. The base fee (the “Base Fees”) for the Consultant’s services hereunder shall be at the rate of CAD$12,500.00 per month, plus applicable goods and services tax, payable in equal monthly amounts in advance on the first business day of each calendar month. The Consultant shall be entitled to receive additional discretionary bonuses as the Board of Directors may from time to time determine. In addition, the Consultant shall be entitled to enroll in a health and benefits plan, the expense of which shall be reimbursed to the Consultant by the Company.

4. The Consultant shall be entitled to participate in the stock option plan of the Company and any grants shall be priced in accordance with the Stock Option Plan and shall remain subject to receipt of all applicable stock exchange and regulatory approvals.

5. The Consultant shall be responsible for:

a.
the payment of income taxes and goods and services tax remittances as shall be required by any governmental entity with respect to fees paid by the Company to the Consultant;
b.
maintaining proper financial records of the Consultant, which records will detail, amongst other things, expenses incurred on behalf of the Company; and


c.
obtaining all necessary licenses and permits and for complying with all applicable federal, provincial and municipal laws, codes and regulations in connection with the provision of services hereunder and the Consultant shall, when requested, provide the Company with adequate evidence of compliance with this paragraph.

6. The terms “subsidiary” and “subsidiaries” as used herein mean any corporation or company of which more than 50% of the outstanding shares carrying voting rights at all times (provided that the ownership of such shares confers the right at all times to elect at least a majority of the Board of Directors of such corporation or company) are for the time being owned by or held for the Company and/or any other corporation or company in like relation to the Company and include any corporation or company in like relation to a subsidiary.

7. During the term of this Agreement, the Consultant shall provide the consulting services to the Company, and the Consultant shall be available to provide such services to the Company in a timely manner subject to availability at the time of the request.

8. The Consultant shall be reimbursed for all traveling and other expenses actually and properly incurred in connection with the duties hereunder.  For all such expenses the Consultant shall furnish to the Company an itemized invoice, detailing the services performed and expenses incurred, including receipts for such expenses on a monthly basis, and the Company will reimburse the Consultant within fourteen (14) days of receipt of the Consultant’s invoice for all appropriate invoiced expenses.

9. The Consultant shall not, either during the continuance of this contract or at any time for a period two (2) years thereafter, disclose the private affairs of the Company and/or its subsidiary or subsidiaries, or any secrets of the Company and/or subsidiary or subsidiaries, to any person other than the Directors of the Company and/or its subsidiary or subsidiaries or for the Company’s purposes and shall not (either during the continuance of this Agreement or at any time thereafter) use, for the Consultant’s own purposes or for any purpose other than those of the Company, any information the Consultant may acquire in relation to the business and affairs of the Company and/or its subsidiary or subsidiaries.

10. The Consultant shall well and faithfully serve the Company or any subsidiary as aforesaid during the continuance of this Agreement to the best of the Consultant’s ability in a competent and professional manner and use best efforts to promote the interests of the Company.

11. This Agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees whatsoever either by way of anticipated earnings or damages of any kind by advising the Consultant in writing.  Just cause shall be defined to include, but is not limited to the following:

a.
Dishonesty or fraud;
b.
Theft;
c.
Breach of fiduciary duties
d.
Being guilty of bribery or attempted bribery; or
e.
Gross mismanagement.
 a.
    

In the event this Agreement is terminated for just cause, then at the request of the Board of Directors of the Company, the Consultant shall forthwith resign any position or office that the Consultant then holds with the Company or any subsidiary of the Company.

12. Other than in the context of a Change in Control (as defined herein), the Company may terminate this Agreement without cause by making a lump sum payment to the Consultant that is equivalent to 24 months’ Base Fees payable to the Consultant within thirty (30) days of the termination date.

13. In the event that there is a Change in Control of the Company, either the Company or the Consultant shall have one year from the date of such Change in Control to elect to have the Consultant’s appointment terminated. In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to the Consultant that is equivalent to 36 months’ Base Fees plus an amount that is equivalent to all cash bonuses paid to the Consultant in the 36 months’ prior to the Change in Control.  Following a Change in Control all stock options granted to the Consultant shall be dealt with in accordance with the terms of the Company’s stock option plan however all stock options granted to the Consultant, but not yet vested, shall vest immediately.  Similarly, following a Change in Control, all shares granted to the Consultant under the Company’s share compensation plan, but not yet vested, shall vest immediately.

As used herein, “Change in Control” shall be defined as the occurrence of any one or more of the following events:


(1)
the acquisition, directly or indirectly, by any person (person being defined as an individual, a corporation, a partnership, an unincorporated association or organization, a trust, a government or department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual and an associate or affiliate of any thereof as such terms are defined in the Canada Business Corporations Act) or group of persons acting jointly or in concert, as such terms are defined in the Securities Act, Ontario of: (A) shares or rights or options to acquire shares of the Company or securities which are convertible into shares of the Company or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast at a meeting of the shareholders of the Company; (B) shares or rights or options to acquire shares, or their equivalent, of any material subsidiary of the Company or securities which are convertible into shares of the material subsidiary or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast a meeting of the shareholders of the material subsidiary; or (C) more than 25% of the material assets of the Company, including the acquisition of more than 25% of the material assets of any material subsidiary of the Company; or


(2)
as a result of or in connection with: (A) a contested election of directors; or (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisitions involving the Company or any of its Affiliates and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Company’s board of directors do not constitute a majority of the Company’s board of directors.

Notwithstanding anything herein, a Change in Control shall not be deemed to have occurred if any of the events referred to in paragraphs 13(1) and 13(2) occurs as a result of a consolidation, merger, amalgamation, arrangement or other reorganization between the Company and any Forbes Group Company.


As used herein, a “Forbes Group Company” is

(1)
any entity that has entered into a shared costs services agreement with 2227929 Ontario Inc. more than 90 days prior to the occurrence of such Change in Control; or
(2)
any entity that
a.
does not have its shares, units or other equity listed on a public securities exchange; and
b.
has, for more than 90 days prior to the occurrence of such Change in Control, more than 25% of its shares, units or other equity held collectively by Forbes & Manhattan, Inc. (including any of its affiliates as defined pursuant to the Canada Business Corporations Act) or any director, officer or shareholder of Forbes & Manhattan, Inc.

14. The services to be performed by the Consultant pursuant hereto are personal in character, and neither this Agreement nor any rights or benefits arising thereunder are assignable by the Consultant without the previous written consent of the Company.

15. The Company shall indemnify and hold the Consultant harmless to the fullest extent allowed by the law from and against all claims, actions, losses, expenses, costs or damages of every nature and kind whatsoever the Consultant may suffer by reason of the fact that the Consultant is or was a consultant, officer, employee or agent of the Company or any subsidiary of the Company, or by reason of any act done or not done by the Consultant in any such capacity or capacities, provided that the Consultant acted in good faith, in a manner reasonably believed to be in or not opposed to the best interest of the Company and its subsidiaries.

16. It is expressly agreed, represented and understood that the parties hereto have entered into an arms-length independent contract for the rendering of consulting services and that the Consultant is not the employee, agent or servant or the Company.  Further, this agreement shall not be deemed to constitute or create any partnership, joint venture, master-servant, employer-employee, principal-agent or any other relationship apart from an independent contractor and contractee relationship.  Payments made to the Consultant hereunder shall be made without deduction at source by the Company for the purpose of withholding income tax, unemployment insurance payments or Canada Pension Plan contributions or the like.

17. Any notice in writing or permitted to be given to the Consultant hereunder shall be sufficiently given if delivered to the Consultant personally or mailed by registered mail, postage prepaid, addressed to the Consultant at the last residential address known to the Secretary of the Company.  Any such notice mailed as aforesaid shall be deemed to have been received by the Consultant on the first business day following the date of mailing.  Any notice in writing required or permitted to be given to the Company hereunder shall be given by registered mail, postage prepaid, addressed to the Company at the address shown on page 1 hereof.  Any such notice mailed as aforesaid shall be deemed to have been received by the Company on the first business day following the date of the mailing.  Any such address for the giving of notices hereunder may be changed by notice in writing given hereunder.

18. The provisions of this Agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators and legal personal representatives of the Consultant and the successors and assigns of the Company.  For this purpose, the terms “successors” and “assigns” shall include any person, firm or corporation or other entity which at any time, whether by merger, purchase or otherwise, shall acquire all or substantially all of the assets or business of the Company.


19. The division of this Agreement into paragraphs is for the convenience of reference only and shall not affect the construction or interpretation of this Agreement.  The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular paragraph or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to paragraphs are to paragraphs of this Agreement.

20. Every provision of this Agreement is intended to be serverable.  If any term or provision hereof is determined to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of the provisions of this Agreement.

21. This Agreement is being delivered and is intended to be performed in the Province of Ontario and shall be construed and enforced in accordance with, and the rights of both parties shall be governed by, the laws of such Province and the laws of Canada applicable therein.  For the purpose of all legal proceedings this Agreement shall be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario shall have jurisdiction to entertain any action arising under this Agreement. The Company and the Consultant each hereby attorns to the jurisdiction of the courts of the Province of Ontario provided that nothing herein contained shall prevent the Company from proceeding at its election against the Consultant in the courts of any other province or country.

22. No amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by both of the parties hereto. No waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, shall be limited to the specific breach waived.


[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]


IN WITNESS WHEREOF this Agreement has been executed as of the day, month and year first above written.


FLORA GROWTH CORP.


Per: Deborah Battiston  
 Authorized Signing Officer


FORBES & MANHATTAN, INC.


Per: Stan Bharti 
 Authorized Signing Officer


INDEPENDENT CONTRACTOR AGREEMENT

THIS AGREEMENT is made as of the 14th day of March, 2019

BETWEEN:

FLORA GROWTH CORP., a body corporate duly incorporated under the laws of the Province of Ontario

(hereinafter called the “Company”)
                       OF THE FIRST PART

AND:        


STAN BHARTI, an individual with an address of [personal information redacted]

(hereinafter called the “Consultant”)

         OF THE SECOND PART

FOR VALUABLE CONSIDERATION it is hereby agreed as follows:

1. The Consultant shall provide consulting services to the Company in the capacity of Executive Chairman. The Consultant shall serve the Company (and/or such subsidiary or subsidiaries of the company as the Company may from time to time require) in such consulting capacity or capacities as may from time to time be determined by resolution of the Board of Directors of the Company acting reasonably and shall perform such duties and exercise such powers as may from time to time be determined by resolution of the Board of Directors, as an independent contractor.

2. The term of this Agreement shall be from the date hereof and shall continue until terminated in accordance with the termination provisions herein.

3. The base fee (the “Base Fees”) for the Consultant’s services hereunder shall be at the rate of CAD$12,500.00 per month, plus applicable goods and services tax, payable in equal monthly amounts in advance on the first business day of each calendar month. The Consultant shall be entitled to receive additional discretionary bonuses as the Board of Directors may from time to time determine. In addition, the Consultant shall be entitled to enroll in a health and benefits plan, the expense of which shall be reimbursed to the Consultant by the Company.

4. The Consultant shall be entitled to participate in the stock option plan of the Company and any grants shall be priced in accordance with the Stock Option Plan and shall remain subject to receipt of all applicable stock exchange and regulatory approvals.

5. The Consultant shall be responsible for:

a.
the payment of income taxes and goods and services tax remittances as shall be required by any governmental entity with respect to fees paid by the Company to the Consultant;
b.
maintaining proper financial records of the Consultant, which records will detail, amongst other things, expenses incurred on behalf of the Company; and


c.
obtaining all necessary licenses and permits and for complying with all applicable federal, provincial and municipal laws, codes and regulations in connection with the provision of services hereunder and the Consultant shall, when requested, provide the Company with adequate evidence of compliance with this paragraph.

6. The terms “subsidiary” and “subsidiaries” as used herein mean any corporation or company of which more than 50% of the outstanding shares carrying voting rights at all times (provided that the ownership of such shares confers the right at all times to elect at least a majority of the Board of Directors of such corporation or company) are for the time being owned by or held for the Company and/or any other corporation or company in like relation to the Company and include any corporation or company in like relation to a subsidiary.

7. During the term of this Agreement, the Consultant shall provide the consulting services to the Company, and the Consultant shall be available to provide such services to the Company in a timely manner subject to availability at the time of the request.

8. The Consultant shall be reimbursed for all traveling and other expenses actually and properly incurred in connection with the duties hereunder.  For all such expenses the Consultant shall furnish to the Company an itemized invoice, detailing the services performed and expenses incurred, including receipts for such expenses on a monthly basis, and the Company will reimburse the Consultant within fourteen (14) days of receipt of the Consultant’s invoice for all appropriate invoiced expenses.

9. The Consultant shall not, either during the continuance of this contract or at any time for a period two (2) years thereafter, disclose the private affairs of the Company and/or its subsidiary or subsidiaries, or any secrets of the Company and/or subsidiary or subsidiaries, to any person other than the Directors of the Company and/or its subsidiary or subsidiaries or for the Company’s purposes and shall not (either during the continuance of this Agreement or at any time thereafter) use, for the Consultant’s own purposes or for any purpose other than those of the Company, any information the Consultant may acquire in relation to the business and affairs of the Company and/or its subsidiary or subsidiaries.

10. The Consultant shall well and faithfully serve the Company or any subsidiary as aforesaid during the continuance of this Agreement to the best of the Consultant’s ability in a competent and professional manner and use best efforts to promote the interests of the Company.

11. This Agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees whatsoever either by way of anticipated earnings or damages of any kind by advising the Consultant in writing.  Just cause shall be defined to include, but is not limited to the following:

a.
Dishonesty or fraud;
b.
Theft;
c.
Breach of fiduciary duties;
d.
Being guilty of bribery or attempted bribery; or
e.
Gross mismanagement.
          
          
            
           
In the event this Agreement is terminated for just cause, then at the request of the Board of Directors of the Company, the Consultant shall forthwith resign any position or office that the Consultant then holds with the Company or any subsidiary of the Company.

12. Other than in the context of a Change in Control (as defined herein), the Company may terminate this Agreement without cause by making a lump sum payment to the Consultant that is equivalent to 24 months’ Base Fees payable to the Consultant within thirty (30) days of the termination date.

13. In the event that there is a Change in Control of the Company, either the Company or the Consultant shall have one year from the date of such Change in Control to elect to have the Consultant’s appointment terminated. In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to the Consultant that is equivalent to 36 months’ Base Fees plus an amount that is equivalent to all cash bonuses paid to the Consultant in the 36 months’ prior to the Change in Control.  Following a Change in Control all stock options granted to the Consultant shall be dealt with in accordance with the terms of the Company’s stock option plan however all stock options granted to the Consultant, but not yet vested, shall vest immediately.  Similarly, following a Change in Control, all shares granted to the Consultant under the Company’s share compensation plan, but not yet vested, shall vest immediately.

As used herein, “Change in Control” shall be defined as the occurrence of any one or more of the following events:


(1)
the acquisition, directly or indirectly, by any person (person being defined as an individual, a corporation, a partnership, an unincorporated association or organization, a trust, a government or department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual and an associate or affiliate of any thereof as such terms are defined in the Canada Business Corporations Act) or group of persons acting jointly or in concert, as such terms are defined in the Securities Act, Ontario of: (A) shares or rights or options to acquire shares of the Company or securities which are convertible into shares of the Company or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast at a meeting of the shareholders of the Company; (B) shares or rights or options to acquire shares, or their equivalent, of any material subsidiary of the Company or securities which are convertible into shares of the material subsidiary or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast a meeting of the shareholders of the material subsidiary; or (C) more than 25% of the material assets of the Company, including the acquisition of more than 25% of the material assets of any material subsidiary of the Company; or


(2)
as a result of or in connection with: (A) a contested election of directors; or (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisitions involving the Company or any of its Affiliates and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Company’s board of directors do not constitute a majority of the Company’s board of directors.

Notwithstanding anything herein, a Change in Control shall not be deemed to have occurred if any of the events referred to in paragraphs 13(1) and 13(2) occurs as a result of a consolidation, merger, amalgamation, arrangement or other reorganization between the Company and any Forbes Group Company.


As used herein, a “Forbes Group Company” is

(1)
any entity that has entered into a shared costs services agreement with 2227929 Ontario Inc. more than 90 days prior to the occurrence of such Change in Control; or
(2)
any entity that
a.
does not have its shares, units or other equity listed on a public securities exchange; and
b.
has, for more than 90 days prior to the occurrence of such Change in Control, more than 25% of its shares, units or other equity held collectively by Forbes & Manhattan, Inc. (including any of its affiliates as defined pursuant to the Canada Business Corporations Act) or any director, officer or shareholder of Forbes & Manhattan, Inc.

14. The services to be performed by the Consultant pursuant hereto are personal in character, and neither this Agreement nor any rights or benefits arising thereunder are assignable by the Consultant without the previous written consent of the Company.

15. The Company shall indemnify and hold the Consultant harmless to the fullest extent allowed by the law from and against all claims, actions, losses, expenses, costs or damages of every nature and kind whatsoever the Consultant may suffer by reason of the fact that the Consultant is or was a consultant, officer, employee or agent of the Company or any subsidiary of the Company, or by reason of any act done or not done by the Consultant in any such capacity or capacities, provided that the Consultant acted in good faith, in a manner reasonably believed to be in or not opposed to the best interest of the Company and its subsidiaries.

16. It is expressly agreed, represented and understood that the parties hereto have entered into an arms-length independent contract for the rendering of consulting services and that the Consultant is not the employee, agent or servant or the Company.  Further, this agreement shall not be deemed to constitute or create any partnership, joint venture, master-servant, employer-employee, principal-agent or any other relationship apart from an independent contractor and contractee relationship.  Payments made to the Consultant hereunder shall be made without deduction at source by the Company for the purpose of withholding income tax, unemployment insurance payments or Canada Pension Plan contributions or the like.

17. Any notice in writing or permitted to be given to the Consultant hereunder shall be sufficiently given if delivered to the Consultant personally or mailed by registered mail, postage prepaid, addressed to the Consultant at the last residential address known to the Secretary of the Company.  Any such notice mailed as aforesaid shall be deemed to have been received by the Consultant on the first business day following the date of mailing.  Any notice in writing required or permitted to be given to the Company hereunder shall be given by registered mail, postage prepaid, addressed to the Company at the address shown on page 1 hereof.  Any such notice mailed as aforesaid shall be deemed to have been received by the Company on the first business day following the date of the mailing.  Any such address for the giving of notices hereunder may be changed by notice in writing given hereunder.

18. The provisions of this Agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators and legal personal representatives of the Consultant and the successors and assigns of the Company.  For this purpose, the terms “successors” and “assigns” shall include any person, firm or corporation or other entity which at any time, whether by merger, purchase or otherwise, shall acquire all or substantially all of the assets or business of the Company.


19. The division of this Agreement into paragraphs is for the convenience of reference only and shall not affect the construction or interpretation of this Agreement.  The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular paragraph or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to paragraphs are to paragraphs of this Agreement.

20. Every provision of this Agreement is intended to be serverable.  If any term or provision hereof is determined to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of the provisions of this Agreement.

21. This Agreement is being delivered and is intended to be performed in the Province of Ontario and shall be construed and enforced in accordance with, and the rights of both parties shall be governed by, the laws of such Province and the laws of Canada applicable therein.  For the purpose of all legal proceedings this Agreement shall be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario shall have jurisdiction to entertain any action arising under this Agreement. The Company and the Consultant each hereby attorns to the jurisdiction of the courts of the Province of Ontario provided that nothing herein contained shall prevent the Company from proceeding at its election against the Consultant in the courts of any other province or country.

22. No amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by both of the parties hereto. No waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, shall be limited to the specific breach waived.


[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]


IN WITNESS WHEREOF this Agreement has been executed as of the day, month and year first above written.


FLORA GROWTH CORP.


Per: Deborah Battiston 
 Authorized Signing Officer



Miya Kobayashi”                    Stan Bharti” 
Witness                     Stan Bharti


INDEPENDENT CONTRACTOR AGREEMENT

THIS AGREEMENT is made as of the 14th day of March, 2019

BETWEEN:

FLORA GROWTH CORP., a body corporate duly incorporated under the laws of the Province of Ontario

(hereinafter called the “Company”)
        OF THE FIRST PART

AND:

DAMIAN LOPEZ CONSULTING PROFESSIONAL CORPORATION, through the person of Damian Lopez, an individual with an address of [personal information redacted]

(hereinafter called the “Consultant”)

         OF THE SECOND PART

FOR VALUABLE CONSIDERATION it is hereby agreed as follows:

1. The Consultant shall provide legal consulting services to the Company in the capacity of President and Chief Executive Officer. The Consultant shall serve the Company (and/or such subsidiary or subsidiaries of the company as the Company may from time to time require) in such consulting capacity or capacities as may from time to time be determined by resolution of the Board of Directors of the Company acting reasonably and shall perform such duties and exercise such powers as may from time to time be determined by resolution of the Board of Directors, as an independent contractor.

2. The term of this Agreement shall be from the date hereof and shall continue until terminated in accordance with the termination provisions herein.

3. The base fee (the “Base Fees”) for the Consultant’s services hereunder shall be at the rate of CAD$12,500.00 per month, plus applicable goods and services tax, payable in equal monthly amounts in advance on the first business day of each calendar month. The amount of the Base Fees are to be reviewed by the Board of Directors and the Consultant at least on or before every twelve (12) month anniversary of the execution of this Agreement. The Consultant shall be entitled to receive additional discretionary bonuses as the Board of Directors may from time to time determine. In addition, the Consultant shall be entitled to enroll in a health and benefits plan, the expense of which shall be reimbursed to the Consultant by the Company.

4. The Consultant shall be entitled to participate in the stock option plan of the Company and any grants shall be priced in accordance with the Stock Option Plan and shall remain subject to receipt of all applicable stock exchange and regulatory approvals.

5. The Consultant shall be responsible for:

a.
the payment of income taxes and goods and services tax remittances as shall be required by any governmental entity with respect to fees paid by the Company to the Consultant;
b.
maintaining proper financial records of the Consultant, which records will detail, amongst other things, expenses incurred on behalf of the Company; and
c.
obtaining all necessary licenses and permits and for complying with all applicable federal, provincial and municipal laws, codes and regulations in connection with the provision of services hereunder and the Consultant shall, when requested, provide the Company with adequate evidence of compliance with this paragraph.

6. The terms “subsidiary” and “subsidiaries” as used herein mean any corporation or company of which more than 50% of the outstanding shares carrying voting rights at all times (provided that the ownership of such shares confers the right at all times to elect at least a majority of the Board of Directors of such corporation or company) are for the time being owned by or held for the Company and/or any other corporation or company in like relation to the Company and include any corporation or company in like relation to a subsidiary.

7. During the term of this Agreement, the Consultant shall provide the consulting services to the Company, and the Consultant shall be available to provide such services to the Company in a timely manner subject to availability at the time of the request.

8. The Consultant shall be reimbursed for all traveling and other expenses actually and properly incurred in connection with the duties hereunder.  For all such expenses the Consultant shall furnish to the Company an itemized invoice, detailing the services performed and expenses incurred, including receipts for such expenses on a monthly basis, and the Company will reimburse the Consultant within fourteen (14) days of receipt of the Consultant’s invoice for all appropriate invoiced expenses.

9. The Consultant shall not, either during the continuance of this contract or at any time for a period two (2) years thereafter, disclose the private affairs of the Company and/or its subsidiary or subsidiaries, or any secrets of the Company and/or subsidiary or subsidiaries, to any person other than the Directors of the Company and/or its subsidiary or subsidiaries or for the Company’s purposes and shall not (either during the continuance of this Agreement or at any time thereafter) use, for the Consultant’s own purposes or for any purpose other than those of the Company, any information the Consultant may acquire in relation to the business and affairs of the Company and/or its subsidiary or subsidiaries.

10. The Consultant shall well and faithfully serve the Company or any subsidiary as aforesaid during the continuance of this Agreement to the best of the Consultant’s ability in a competent and professional manner and use best efforts to promote the interests of the Company.

11. This Agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees whatsoever either by way of anticipated earnings or damages of any kind by advising the Consultant in writing.  Just cause shall be defined to include, but is not limited to the following:

a.
Dishonesty or fraud;
b.
Theft;
c.
Breach of fiduciary duties;
d.
Being guilty of bribery or attempted bribery; or
e.
Gross mismanagement.
           
           
             
            
   In the event this Agreement is terminated for just cause, then at the request of the Board of Directors of the Company, the Consultant shall forthwith resign any position or office that the Consultant then holds with the Company or any subsidiary of the Company.

12. Other than in the context of a Change in Control (as defined herein), the Company may terminate this Agreement without cause by making a lump sum payment to the Consultant that is equivalent to 36 months’ Base Fees payable to the Consultant within thirty (30) days of the termination date.

13. In the event that there is a Change in Control of the Company, either the Company or the Consultant shall have one year from the date of such Change in Control to elect to have the Consultant’s appointment terminated. In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to the Consultant that is equivalent to 36 months’ Base Fees plus an amount that is equivalent to all cash bonuses paid to the Consultant in the 36 months’ prior to the Change in Control.  Following a Change in Control all stock options granted to the Consultant shall be dealt with in accordance with the terms of the Company’s stock option plan however all stock options granted to the Consultant, but not yet vested, shall vest immediately.  Similarly, following a Change in Control, all shares granted to the Consultant under the Company’s share compensation plan, but not yet vested, shall vest immediately.

As used herein, “Change in Control” shall be defined as the occurrence of any one or more of the following events:


(1)
the acquisition, directly or indirectly, by any person (person being defined as an individual, a corporation, a partnership, an unincorporated association or organization, a trust, a government or department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual and an associate or affiliate of any thereof as such terms are defined in the Canada Business Corporations Act) or group of persons acting jointly or in concert, as such terms are defined in the Securities Act, Ontario of: (A) shares or rights or options to acquire shares of the Company or securities which are convertible into shares of the Company or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast at a meeting of the shareholders of the Company; (B) shares or rights or options to acquire shares, or their equivalent, of any material subsidiary of the Company or securities which are convertible into shares of the material subsidiary or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast a meeting of the shareholders of the material subsidiary; or (C) more than 25% of the material assets of the Company, including the acquisition of more than 25% of the material assets of any material subsidiary of the Company; or


(2)
as a result of or in connection with: (A) a contested election of directors; or (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisitions involving the Company or any of its Affiliates and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Company’s board of directors do not constitute a majority of the Company’s board of directors.

Notwithstanding anything herein, a Change in Control shall not be deemed to have occurred if any of the events referred to in paragraphs 13(1) and 13(2) occurs as a result of a consolidation, merger, amalgamation, arrangement or other reorganization between the Company and any Forbes Group Company.


             As used herein, a “Forbes Group Company” is

(1)
any entity that has entered into a shared costs services agreement with 2227929 Ontario Inc. more than 90 days prior to the occurrence of such Change in Control; or
(2)
any entity that
a.
does not have its shares, units or other equity listed on a public securities exchange; and
b.
has, for more than 90 days prior to the occurrence of such Change in Control, more than 25% of its shares, units or other equity held collectively by Forbes & Manhattan, Inc. (including any of its affiliates as defined pursuant to the Canada Business Corporations Act) or any director, officer or shareholder of Forbes & Manhattan, Inc.

14. The services to be performed by the Consultant pursuant hereto are personal in character, and neither this Agreement nor any rights or benefits arising thereunder are assignable by the Consultant without the previous written consent of the Company.

15. The Company shall indemnify and hold the Consultant harmless to the fullest extent allowed by the law from and against all claims, actions, losses, expenses, costs or damages of every nature and kind whatsoever the Consultant may suffer by reason of the fact that the Consultant is or was a consultant, officer, employee or agent of the Company or any subsidiary of the Company, or by reason of any act done or not done by the Consultant in any such capacity or capacities, provided that the Consultant acted in good faith, in a manner reasonably believed to be in or not opposed to the best interest of the Company and its subsidiaries.

16. It is expressly agreed, represented and understood that the parties hereto have entered into an arms-length independent contract for the rendering of consulting services and that the Consultant is not the employee, agent or servant or the Company.  Further, this agreement shall not be deemed to constitute or create any partnership, joint venture, master-servant, employer-employee, principal-agent or any other relationship apart from an independent contractor and contractee relationship.  Payments made to the Consultant hereunder shall be made without deduction at source by the Company for the purpose of withholding income tax, unemployment insurance payments or Canada Pension Plan contributions or the like.

17. Any notice in writing or permitted to be given to the Consultant hereunder shall be sufficiently given if delivered to the Consultant personally or mailed by registered mail, postage prepaid, addressed to the Consultant at the last residential address known to the Secretary of the Company.  Any such notice mailed as aforesaid shall be deemed to have been received by the Consultant on the first business day following the date of mailing.  Any notice in writing required or permitted to be given to the Company hereunder shall be given by registered mail, postage prepaid, addressed to the Company at the address shown on page 1 hereof.  Any such notice mailed as aforesaid shall be deemed to have been received by the Company on the first business day following the date of the mailing.  Any such address for the giving of notices hereunder may be changed by notice in writing given hereunder.


18. The provisions of this Agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators and legal personal representatives of the Consultant and the successors and assigns of the Company.  For this purpose, the terms “successors” and “assigns” shall include any person, firm or corporation or other entity which at any time, whether by merger, purchase or otherwise, shall acquire all or substantially all of the assets or business of the Company.

19. The division of this Agreement into paragraphs is for the convenience of reference only and shall not affect the construction or interpretation of this Agreement.  The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular paragraph or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to paragraphs are to paragraphs of this Agreement.

20. Every provision of this Agreement is intended to be serverable.  If any term or provision hereof is determined to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of the provisions of this Agreement.

21. This Agreement is being delivered and is intended to be performed in the Province of Ontario and shall be construed and enforced in accordance with, and the rights of both parties shall be governed by, the laws of such Province and the laws of Canada applicable therein.  For the purpose of all legal proceedings this Agreement shall be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario shall have jurisdiction to entertain any action arising under this Agreement. The Company and the Consultant each hereby attorns to the jurisdiction of the courts of the Province of Ontario provided that nothing herein contained shall prevent the Company from proceeding at its election against the Consultant in the courts of any other province or country.

22. No amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by both of the parties hereto. No waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, shall be limited to the specific breach waived.


[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]


IN WITNESS WHEREOF this Agreement has been executed as of the day, month and year first above written.


FLORA GROWTH CORP.


Per: Deborah Battiston 
 Authorized Signing Officer



DAMIAN LOPEZ CONSULTING PROFESSIONAL CORPORATION


Per:Damian Lopez 
 Authorized Signing Officer


INDEPENDENT CONTRACTOR AGREEMENT

THIS AGREEMENT is made as of the 14th day of March, 2019

BETWEEN:

FLORA GROWTH CORP., a body corporate duly incorporated under the laws of the Province of Ontario

(hereinafter called the “Company”)
        OF THE FIRST PART

AND:

JADAN CONSULTING CORPORATION, through the person of Deborah Battiston, an individual with an address of [personal information redacted]

(hereinafter called the “Consultant”)
         OF THE SECOND PART

FOR VALUABLE CONSIDERATION it is hereby agreed as follows:

1. The Consultant shall provide consulting services to the Company in the capacity of Chief Financial Officer. The Consultant shall serve the Company (and/or such subsidiary or subsidiaries of the company as the Company may from time to time require) in such consulting capacity or capacities as may from time to time be determined by resolution of the Board of Directors of the Company acting reasonably and shall perform such duties and exercise such powers as may from time to time be determined by resolution of the Board of Directors, as an independent contractor.

2. The term of this Agreement shall be from the date hereof and shall continue until terminated in accordance with the termination provisions herein.

3. The base fee (the “Base Fees”) for the Consultant’s services hereunder shall be at the rate of CAD$7,500.00 per month, plus applicable goods and services tax, payable in equal monthly amounts in advance on the first business day of each calendar month. The Consultant shall be entitled to receive additional discretionary bonuses as the Board of Directors may from time to time determine. In addition, the Consultant shall be entitled to enroll in a health and benefits plan, the expense of which shall be reimbursed to the Consultant by the Company.

4. The Consultant shall be entitled to participate in the stock option plan of the Company and any grants shall be priced in accordance with the Stock Option Plan and shall remain subject to receipt of all applicable stock exchange and regulatory approvals.

5. The Consultant shall be responsible for:

a.
the payment of income taxes and goods and services tax remittances as shall be required by any governmental entity with respect to fees paid by the Company to the Consultant;
b.
maintaining proper financial records of the Consultant, which records will detail, amongst other things, expenses incurred on behalf of the Company; and


c.
obtaining all necessary licenses and permits and for complying with all applicable federal, provincial and municipal laws, codes and regulations in connection with the provision of services hereunder and the Consultant shall, when requested, provide the Company with adequate evidence of compliance with this paragraph.

6. The terms “subsidiary” and “subsidiaries” as used herein mean any corporation or company of which more than 50% of the outstanding shares carrying voting rights at all times (provided that the ownership of such shares confers the right at all times to elect at least a majority of the Board of Directors of such corporation or company) are for the time being owned by or held for the Company and/or any other corporation or company in like relation to the Company and include any corporation or company in like relation to a subsidiary.

7. During the term of this Agreement, the Consultant shall provide the consulting services to the Company, and the Consultant shall be available to provide such services to the Company in a timely manner subject to availability at the time of the request.

8. The Consultant shall be reimbursed for all traveling and other expenses actually and properly incurred in connection with the duties hereunder.  For all such expenses the Consultant shall furnish to the Company an itemized invoice, detailing the services performed and expenses incurred, including receipts for such expenses on a monthly basis, and the Company will reimburse the Consultant within fourteen (14) days of receipt of the Consultant’s invoice for all appropriate invoiced expenses.

9. The Consultant shall not, either during the continuance of this contract or at any time for a period two (2) years thereafter, disclose the private affairs of the Company and/or its subsidiary or subsidiaries, or any secrets of the Company and/or subsidiary or subsidiaries, to any person other than the Directors of the Company and/or its subsidiary or subsidiaries or for the Company’s purposes and shall not (either during the continuance of this Agreement or at any time thereafter) use, for the Consultant’s own purposes or for any purpose other than those of the Company, any information the Consultant may acquire in relation to the business and affairs of the Company and/or its subsidiary or subsidiaries.

10. The Consultant shall well and faithfully serve the Company or any subsidiary as aforesaid during the continuance of this Agreement to the best of the Consultant’s ability in a competent and professional manner and use best efforts to promote the interests of the Company.

11. This Agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees whatsoever either by way of anticipated earnings or damages of any kind by advising the Consultant in writing.  Just cause shall be defined to include, but is not limited to the following:

a.
Dishonesty or fraud;
b.
Theft;
c.
Breach of fiduciary duties;
d.
Being guilty of bribery or attempted bribery; or
e.
Gross mismanagement.
           
           
             
            
   In the event this Agreement is terminated for just cause, then at the request of the Board of Directors of the Company, the Consultant shall forthwith resign any position or office that the Consultant then holds with the Company or any subsidiary of the Company.

12. Other than in the context of a Change in Control (as defined herein), the Company may terminate this Agreement without cause by making a lump sum payment to the Consultant that is equivalent to 24 months’ Base Fees payable to the Consultant within thirty (30) days of the termination date.

13. In the event that there is a Change in Control of the Company, either the Company or the Consultant shall have one year from the date of such Change in Control to elect to have the Consultant’s appointment terminated. In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to the Consultant that is equivalent to 36 months’ Base Fees plus an amount that is equivalent to all cash bonuses paid to the Consultant in the 36 months’ prior to the Change in Control.  Following a Change in Control all stock options granted to the Consultant shall be dealt with in accordance with the terms of the Company’s stock option plan however all stock options granted to the Consultant, but not yet vested, shall vest immediately.  Similarly, following a Change in Control, all shares granted to the Consultant under the Company’s share compensation plan, but not yet vested, shall vest immediately.

As used herein, “Change in Control” shall be defined as the occurrence of any one or more of the following events:


(1)
the acquisition, directly or indirectly, by any person (person being defined as an individual, a corporation, a partnership, an unincorporated association or organization, a trust, a government or department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual and an associate or affiliate of any thereof as such terms are defined in the Canada Business Corporations Act) or group of persons acting jointly or in concert, as such terms are defined in the Securities Act, Ontario of: (A) shares or rights or options to acquire shares of the Company or securities which are convertible into shares of the Company or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast at a meeting of the shareholders of the Company; (B) shares or rights or options to acquire shares, or their equivalent, of any material subsidiary of the Company or securities which are convertible into shares of the material subsidiary or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast a meeting of the shareholders of the material subsidiary; or (C) more than 25% of the material assets of the Company, including the acquisition of more than 25% of the material assets of any material subsidiary of the Company; or


(2)
as a result of or in connection with: (A) a contested election of directors; or (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisitions involving the Company or any of its Affiliates and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Company’s board of directors do not constitute a majority of the Company’s board of directors.

Notwithstanding anything herein, a Change in Control shall not be deemed to have occurred if any of the events referred to in paragraphs 13(1) and 13(2) occurs as a result of a consolidation, merger, amalgamation, arrangement or other reorganization between the Company and any Forbes Group Company.


As used herein, a “Forbes Group Company” is

(1)
any entity that has entered into a shared costs services agreement with 2227929 Ontario Inc. more than 90 days prior to the occurrence of such Change in Control; or
(2)
any entity that
a.
does not have its shares, units or other equity listed on a public securities exchange; and
b.
has, for more than 90 days prior to the occurrence of such Change in Control, more than 25% of its shares, units or other equity held collectively by Forbes & Manhattan, Inc. (including any of its affiliates as defined pursuant to the Canada Business Corporations Act) or any director, officer or shareholder of Forbes & Manhattan, Inc.

14. The services to be performed by the Consultant pursuant hereto are personal in character, and neither this Agreement nor any rights or benefits arising thereunder are assignable by the Consultant without the previous written consent of the Company.

15. The Company shall indemnify and hold the Consultant harmless to the fullest extent allowed by the law from and against all claims, actions, losses, expenses, costs or damages of every nature and kind whatsoever the Consultant may suffer by reason of the fact that the Consultant is or was a consultant, officer, employee or agent of the Company or any subsidiary of the Company, or by reason of any act done or not done by the Consultant in any such capacity or capacities, provided that the Consultant acted in good faith, in a manner reasonably believed to be in or not opposed to the best interest of the Company and its subsidiaries.

16. It is expressly agreed, represented and understood that the parties hereto have entered into an arms-length independent contract for the rendering of consulting services and that the Consultant is not the employee, agent or servant or the Company.  Further, this agreement shall not be deemed to constitute or create any partnership, joint venture, master-servant, employer-employee, principal-agent or any other relationship apart from an independent contractor and contractee relationship.  Payments made to the Consultant hereunder shall be made without deduction at source by the Company for the purpose of withholding income tax, unemployment insurance payments or Canada Pension Plan contributions or the like.

17. Any notice in writing or permitted to be given to the Consultant hereunder shall be sufficiently given if delivered to the Consultant personally or mailed by registered mail, postage prepaid, addressed to the Consultant at the last residential address known to the Secretary of the Company.  Any such notice mailed as aforesaid shall be deemed to have been received by the Consultant on the first business day following the date of mailing.  Any notice in writing required or permitted to be given to the Company hereunder shall be given by registered mail, postage prepaid, addressed to the Company at the address shown on page 1 hereof.  Any such notice mailed as aforesaid shall be deemed to have been received by the Company on the first business day following the date of the mailing.  Any such address for the giving of notices hereunder may be changed by notice in writing given hereunder.

18. The provisions of this Agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators and legal personal representatives of the Consultant and the successors and assigns of the Company.  For this purpose, the terms “successors” and “assigns” shall include any person, firm or corporation or other entity which at any time, whether by merger, purchase or otherwise, shall acquire all or substantially all of the assets or business of the Company.


19. The division of this Agreement into paragraphs is for the convenience of reference only and shall not affect the construction or interpretation of this Agreement.  The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular paragraph or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to paragraphs are to paragraphs of this Agreement.

20. Every provision of this Agreement is intended to be serverable.  If any term or provision hereof is determined to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of the provisions of this Agreement.

21. This Agreement is being delivered and is intended to be performed in the Province of Ontario and shall be construed and enforced in accordance with, and the rights of both parties shall be governed by, the laws of such Province and the laws of Canada applicable therein.  For the purpose of all legal proceedings this Agreement shall be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario shall have jurisdiction to entertain any action arising under this Agreement. The Company and the Consultant each hereby attorns to the jurisdiction of the courts of the Province of Ontario provided that nothing herein contained shall prevent the Company from proceeding at its election against the Consultant in the courts of any other province or country.

22. No amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by both of the parties hereto. No waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, shall be limited to the specific breach waived.


[REST OF THIS PAGE INTENTIONALLY LEFT BLANK]


IN WITNESS WHEREOF this Agreement has been executed as of the day, month and year first above written.


FLORA GROWTH CORP.


Per: Damian Lopez  
 Authorized Signing Officer



JADAN CONSULTING CORPORATION


Per: Deborah Battiston 
 Authorized Signing Officer

INDEPENDENT CONTRACTOR AGREEMENT

THIS AGREEMENT is made as of the 14th day of March, 2019

BETWEEN:

FLORA GROWTH CORP., a body corporate duly incorporated under the laws of the Province of Ontario

(hereinafter called the “Company”)
        OF THE FIRST PART

AND:

ORLANDO BUSTOS, an individual with an address of [personal information redacted]


(hereinafter called the “Consultant”)
         OF THE SECOND PART

FOR VALUABLE CONSIDERATION it is hereby agreed as follows:

1. The Consultant shall provide consulting services to the Company in the capacity of VP Corporate Development. The Consultant shall serve the Company (and/or such subsidiary or subsidiaries of the company as the Company may from time to time require) in such consulting capacity or capacities as may from time to time be determined by resolution of the Board of Directors of the Company acting reasonably and shall perform such duties and exercise such powers as may from time to time be determined by resolution of the Board of Directors, as an independent contractor.

2. The term of this Agreement shall be from the date hereof and shall continue until terminated in accordance with the termination provisions herein.

3. The base fee (the “Base Fees”) for the Consultant’s services hereunder shall be at the rate of CAD$2,500.00 per month, plus applicable goods and services tax, payable in equal monthly amounts in advance on the first business day of each calendar month. The Consultant shall be entitled to receive additional discretionary bonuses as the Board of Directors may from time to time determine. In addition, the Consultant shall be entitled to enroll in a health and benefits plan, the expense of which shall be reimbursed to the Consultant by the Company.

4. The Consultant shall be entitled to participate in the stock option plan of the Company and any grants shall be priced in accordance with the Stock Option Plan and shall remain subject to receipt of all applicable stock exchange and regulatory approvals.

5. The Consultant shall be responsible for:

a.
the payment of income taxes and goods and services tax remittances as shall be required by any governmental entity with respect to fees paid by the Company to the Consultant;


b.
maintaining proper financial records of the Consultant, which records will detail, amongst other things, expenses incurred on behalf of the Company; and
c.
obtaining all necessary licenses and permits and for complying with all applicable federal, provincial and municipal laws, codes and regulations in connection with the provision of services hereunder and the Consultant shall, when requested, provide the Company with adequate evidence of compliance with this paragraph.

6. The terms “subsidiary” and “subsidiaries” as used herein mean any corporation or company of which more than 50% of the outstanding shares carrying voting rights at all times (provided that the ownership of such shares confers the right at all times to elect at least a majority of the Board of Directors of such corporation or company) are for the time being owned by or held for the Company and/or any other corporation or company in like relation to the Company and include any corporation or company in like relation to a subsidiary.

7. During the term of this Agreement, the Consultant shall provide the consulting services to the Company, and the Consultant shall be available to provide such services to the Company in a timely manner subject to availability at the time of the request.

8. The Consultant shall be reimbursed for all traveling and other expenses actually and properly incurred in connection with the duties hereunder.  For all such expenses the Consultant shall furnish to the Company an itemized invoice, detailing the services performed and expenses incurred, including receipts for such expenses on a monthly basis, and the Company will reimburse the Consultant within fourteen (14) days of receipt of the Consultant’s invoice for all appropriate invoiced expenses.

9. The Consultant shall not, either during the continuance of this contract or at any time for a period two (2) years thereafter, disclose the private affairs of the Company and/or its subsidiary or subsidiaries, or any secrets of the Company and/or subsidiary or subsidiaries, to any person other than the Directors of the Company and/or its subsidiary or subsidiaries or for the Company’s purposes and shall not (either during the continuance of this Agreement or at any time thereafter) use, for the Consultant’s own purposes or for any purpose other than those of the Company, any information the Consultant may acquire in relation to the business and affairs of the Company and/or its subsidiary or subsidiaries.

10. The Consultant shall well and faithfully serve the Company or any subsidiary as aforesaid during the continuance of this Agreement to the best of the Consultant’s ability in a competent and professional manner and use best efforts to promote the interests of the Company.

11. This Agreement may be terminated at any time for just cause without notice or payment in lieu of notice and without payment of any fees whatsoever either by way of anticipated earnings or damages of any kind by advising the Consultant in writing.  Just cause shall be defined to include, but is not limited to the following:

a.
Dishonesty or fraud;
b.
Theft;
c.
Breach of fiduciary duties;
d.
Being guilty of bribery or attempted bribery; or
e.
Gross mismanagement.
           
           
             
            
   In the event this Agreement is terminated for just cause, then at the request of the Board of Directors of the Company, the Consultant shall forthwith resign any position or office that the Consultant then holds with the Company or any subsidiary of the Company.

12. Other than in the context of a Change in Control (as defined herein), the Company may terminate this Agreement without cause by making a lump sum payment to the Consultant that is equivalent to 24 months’ Base Fees payable to the Consultant within thirty (30) days of the termination date.

13. In the event that there is a Change in Control of the Company, either the Company or the Consultant shall have one year from the date of such Change in Control to elect to have the Consultant’s appointment terminated. In the event that such an election is made, the Company shall, within 30 days of such election, make a lump sum termination payment to the Consultant that is equivalent to 36 months’ Base Fees plus an amount that is equivalent to all cash bonuses paid to the Consultant in the 36 months’ prior to the Change in Control.  Following a Change in Control all stock options granted to the Consultant shall be dealt with in accordance with the terms of the Company’s stock option plan however all stock options granted to the Consultant, but not yet vested, shall vest immediately.  Similarly, following a Change in Control, all shares granted to the Consultant under the Company’s share compensation plan, but not yet vested, shall vest immediately.

As used herein, “Change in Control” shall be defined as the occurrence of any one or more of the following events:


(1)
the acquisition, directly or indirectly, by any person (person being defined as an individual, a corporation, a partnership, an unincorporated association or organization, a trust, a government or department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual and an associate or affiliate of any thereof as such terms are defined in the Canada Business Corporations Act) or group of persons acting jointly or in concert, as such terms are defined in the Securities Act, Ontario of: (A) shares or rights or options to acquire shares of the Company or securities which are convertible into shares of the Company or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast at a meeting of the shareholders of the Company; (B) shares or rights or options to acquire shares, or their equivalent, of any material subsidiary of the Company or securities which are convertible into shares of the material subsidiary or any combination thereof such that after the completion of such acquisition such person would be entitled to exercise 25% or more of the votes entitled to be cast a meeting of the shareholders of the material subsidiary; or (C) more than 25% of the material assets of the Company, including the acquisition of more than 25% of the material assets of any material subsidiary of the Company; or


(2)
as a result of or in connection with: (A) a contested election of directors; or (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisitions involving the Company or any of its Affiliates and another corporation or other entity, the nominees named in the most recent management information circular of the Company for election to the Company’s board of directors do not constitute a majority of the Company’s board of directors.

Notwithstanding anything herein, a Change in Control shall not be deemed to have occurred if any of the events referred to in paragraphs 13(1) and 13(2) occurs as a result of a consolidation, merger, amalgamation, arrangement or other reorganization between the Company and any Forbes Group Company.


As used herein, a “Forbes Group Company” is

(1)
any entity that has entered into a shared costs services agreement with 2227929 Ontario Inc. more than 90 days prior to the occurrence of such Change in Control; or
(2)
any entity that
a.
does not have its shares, units or other equity listed on a public securities exchange; and
b.
has, for more than 90 days prior to the occurrence of such Change in Control, more than 25% of its shares, units or other equity held collectively by Forbes & Manhattan, Inc. (including any of its affiliates as defined pursuant to the Canada Business Corporations Act) or any director, officer or shareholder of Forbes & Manhattan, Inc.

14. The services to be performed by the Consultant pursuant hereto are personal in character, and neither this Agreement nor any rights or benefits arising thereunder are assignable by the Consultant without the previous written consent of the Company.

15. The Company shall indemnify and hold the Consultant harmless to the fullest extent allowed by the law from and against all claims, actions, losses, expenses, costs or damages of every nature and kind whatsoever the Consultant may suffer by reason of the fact that the Consultant is or was a consultant, officer, employee or agent of the Company or any subsidiary of the Company, or by reason of any act done or not done by the Consultant in any such capacity or capacities, provided that the Consultant acted in good faith, in a manner reasonably believed to be in or not opposed to the best interest of the Company and its subsidiaries.

16. It is expressly agreed, represented and understood that the parties hereto have entered into an arms-length independent contract for the rendering of consulting services and that the Consultant is not the employee, agent or servant or the Company.  Further, this agreement shall not be deemed to constitute or create any partnership, joint venture, master-servant, employer-employee, principal-agent or any other relationship apart from an independent contractor and contractee relationship.  Payments made to the Consultant hereunder shall be made without deduction at source by the Company for the purpose of withholding income tax, unemployment insurance payments or Canada Pension Plan contributions or the like.

17. Any notice in writing or permitted to be given to the Consultant hereunder shall be sufficiently given if delivered to the Consultant personally or mailed by registered mail, postage prepaid, addressed to the Consultant at the last residential address known to the Secretary of the Company.  Any such notice mailed as aforesaid shall be deemed to have been received by the Consultant on the first business day following the date of mailing.  Any notice in writing required or permitted to be given to the Company hereunder shall be given by registered mail, postage prepaid, addressed to the Company at the address shown on page 1 hereof.  Any such notice mailed as aforesaid shall be deemed to have been received by the Company on the first business day following the date of the mailing.  Any such address for the giving of notices hereunder may be changed by notice in writing given hereunder.

18. The provisions of this Agreement shall enure to the benefit of and be binding upon the heirs, executors, administrators and legal personal representatives of the Consultant and the successors and assigns of the Company.  For this purpose, the terms “successors” and “assigns” shall include any person, firm or corporation or other entity which at any time, whether by merger, purchase or otherwise, shall acquire all or substantially all of the assets or business of the Company.


19. The division of this Agreement into paragraphs is for the convenience of reference only and shall not affect the construction or interpretation of this Agreement.  The terms “this Agreement”, “hereof”, “hereunder” and similar expressions refer to this Agreement and not to any particular paragraph or other portion hereof and include any agreement or instrument supplemental or ancillary hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to paragraphs are to paragraphs of this Agreement.

20. Every provision of this Agreement is intended to be serverable.  If any term or provision hereof is determined to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of the provisions of this Agreement.

21. This Agreement is being delivered and is intended to be performed in the Province of Ontario and shall be construed and enforced in accordance with, and the rights of both parties shall be governed by, the laws of such Province and the laws of Canada applicable therein.  For the purpose of all legal proceedings this Agreement shall be deemed to have been performed in the Province of Ontario and the courts of the Province of Ontario shall have jurisdiction to entertain any action arising under this Agreement. The Company and the Consultant each hereby attorns to the jurisdiction of the courts of the Province of Ontario provided that nothing herein contained shall prevent the Company from proceeding at its election against the Consultant in the courts of any other province or country.

22. No amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by both of the parties hereto. No waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided in the written waiver, shall be limited to the specific breach waived.


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IN WITNESS WHEREOF this Agreement has been executed as of the day, month and year first above written.


FLORA GROWTH CORP.


Per: Deborah Battiston 
 Authorized Signing Officer



Miya Kobayashi                        Orlando Bustos 
Witness                    Orlando Bustos


UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE WHICH IS FOUR MONTHS AND A DAY AFTER THE LATER OF: (i) •, 2019 AND (ii) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
FOUNDER WARRANT TO PURCHASE COMMON SHARES
OF
FLORA GROWTH CORP.
(incorporated under the laws of Ontario)
Number FWT[NTD: insert number]
Number of Warrants represented
by this certificate: 
 
THIS CERTIFIES THAT, for value received, •(the “Holder”), being the registered holder of this warrant (“Warrant”) is entitled, at any time prior to 5:00 p.m. (Toronto time) on the Expiry Day (as defined below) to subscribe for and purchase the number of common shares (the “Warrant Shares”) of FLORA GROWTH CORP. (the “Company”) set forth above on the basis of one Warrant Share at a price of USD$0.05 (the “Exercise Price”) for each Warrant exercised, subject to adjustment as set out herein, by surrendering to the Company at its principal office, 65 Queen Street West, Suite 805, Toronto, Ontario M5H 2M5, this Warrant certificate (the “Warrant Certificate”), with a completed and executed Subscription Form, and payment in full for the Warrant Shares being purchased.

The Company shall treat the Holder as the absolute owner of this Warrant for all purposes and the Company shall not be affected by any notice or knowledge to the contrary.  The Holder shall be entitled to the rights evidenced by this Warrant free from all equities and rights of set-off or counterclaim between the Company and the original or any intermediate holder and all persons may act accordingly and the receipt by the Holder of the Warrant Shares issuable upon exercise hereof shall be a good discharge to the Company and the Company shall not be bound to inquire into the title of any such Holder.

1.
DefinitionsIn this Warrant Certificate, unless there is something in the subject matter or context inconsistent therewith, the following expressions shall have the following meanings namely:
(a)
Adjustment Period” means the period commencing on the date hereof and ending at the Expiry Time;
(b)
Business Day” means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions are closed in Toronto, Ontario;
(c)
Change of Control” means any of the following:
(i)
a takeover bid (as defined in the Securities Act (Ontario)), which is successful in acquiring Common Shares,
(ii)
the sale of all or substantially all the assets of the Company,
(iii)
the sale, exchange or other disposition of a majority of the outstanding Common Shares in a single transaction or series of related transactions,

(iv)
the dissolution of the Company’s business or the liquidation of its assets,
(d)
Common Shares” means the common shares of the Company as such shares are constituted on the date hereof, as the same may be reorganized, reclassified or otherwise changed pursuant to any of the events set out in Section 11 hereof;
(e)
Company” means FLORA GROWTH CORP., a company incorporated under the laws of Ontario and its successors and assigns;
(f)
Current Market Price” of a Common Share at any date means the price per share equal to the weighted average price at which the Common Shares have traded on any stock exchange for the 20 Trading Days prior to the relevant date as may be selected by the directors of the Company or, if the Common Shares are not listed on any stock exchange, then on the over-the-counter market with the weighted average price per Common Share being determined by dividing the aggregate sale price of all Common Shares sold on the said exchange or market, as the case may be, during the said 20 Trading Days by the aggregate number of Common Shares so sold or, if the Common Shares are not listed or quoted on any stock exchange or over-the-counter market, such price as may be reasonably determined by the directors of the Company after consideration of the market value of the Company and the price at which the Company has issue any Common Shares in the previous 12 months;
(g)
Dividends Paid in the Ordinary Course” means dividends paid in any financial year of the Company, whether in (i) cash; (ii) shares of the Company; (iii) warrants or similar rights to purchase any shares of the Company or property or other assets of the Company provided that the value of such dividends does not in such financial year exceed the greater of:
(i)
150% of the aggregate amount of dividends paid by the Company on the Common Shares in the 12-month period ending immediately prior to the first day of such financial year; and
(ii)
100% of the consolidated net earnings from continuing operations of the Company, before any extraordinary items, for the 12-month period ending immediately prior to the first day of such financial year (such consolidated net earnings from continuing operations to be computed in accordance with generally accepted accounting principles in Canada);
(h)
Exercise Price” means USD$0.05 per Warrant Share, subject to adjustment in accordance with Section 12 hereof;
(i)
Expiry Day” means 36 months from the date hereof;
(j)
Expiry Time” means 5:00 p.m. (Toronto time), on the Expiry Day;
(k)
Holder” shall have the meaning ascribed thereto on the face page hereof;
(l)
person” means an individual, corporation, partnership, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator, or other legal representative, or any group or combination thereof or any other entity whatsoever;
2

(m)
Trading Day” with respect to a stock exchange, market or over-the-counter market means a day on which such stock exchange or over-the-counter market is open for business;
(n)
U.S. Person” means U.S. person as that term is defined in Regulation S adopted by the United States Securities Exchange Commission under the U.S. Securities Act;
(o)
U.S. Securities Act” means the United States Securities Act of 1933, as amended;
(p)
Warrant” means a Warrant exercisable to purchase one Common Share at the Exercise Price until the Expiry Time; and
(q)
 “Warrant Share” means the Common Shares issuable upon the exercise of the Warrants.
2.
Expiry TimeAt the Expiry Time, all rights under the Warrants evidenced hereby, in respect of which the right of subscription and purchase herein provided for shall not theretofore have been exercised, shall expire and be of no further force and effect.
3.
Exercise Procedure:
(a)
Subject to Section 4 herein, the Holder may exercise the right to subscribe and purchase the number of Warrant Shares herein provided, by delivering to the Company prior to the Expiry Time at its principal office this Warrant Certificate, with the Subscription Form attached hereto duly completed and executed by the Holder or its legal representative or attorney, duly appointed by an instrument in writing in form and manner satisfactory to the Company, together with a certified cheque or bank draft payable to or to the order of the Company in an amount equal to the aggregate Exercise Price in respect of the Warrants so exercised.  Any Warrant Certificate so surrendered shall be deemed to be surrendered only upon delivery thereof to the Company at its principal office set forth herein (or to such other address as the Company may notify the Holder).
(b)
Upon such delivery as aforesaid, the Company shall cause to be issued to the Holder hereof the Warrant Shares subscribed for not exceeding those which such Holder is entitled to purchase pursuant to this Warrant Certificate and the Holder hereof shall become a shareholder of the Company in respect of the Warrant Shares subscribed for with effect from the date of such delivery and shall be entitled to delivery of a certificate evidencing the Warrant Shares and the Company shall cause such certificates to be mailed to the Holder hereof at the address or addresses specified in such subscription as soon as practicable, and in any event within five (5) Business Days of such delivery.
(c)
The certificate or certificates representing Warrant Shares issued before the date that is four months and a day after the later of: (i) •, 2019; and (ii) the date the Company became a reporting issuer in any province or territory, shall be impressed with a legend substantially in the following form:
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF: (i) •, 2019; AND (ii) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
3

(d)
This Warrant may not be exercised in the United States or by or on behalf of a U.S. Person unless an exemption is available from the registration requirements of the U.S. Securities Act and applicable state securities laws and the holder of this Warrant has furnished an opinion of counsel of recognized standing in form and substance satisfactory to the Company to such effect.
(e)
If the certificate or certificates representing the Warrants that have been surrendered for exercise bear the legend described below, the certificate or certificates representing the Warrant Shares subscribed for and issued upon exercise of the Warrants shall be correspondingly impressed with the following legend unless such legend is no longer required under the applicable requirements of the U.S. Securities Act or applicable U.S. state laws and regulations,
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF FLORA GROWTH CORP. (THE “CORPORATION”) THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH CANADIAN LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN COMPLIANCE WITH THE EXEMPTION FROM REGISTRATION PROVIDED BY (i) RULE 144A UNDER THE U.S. SECURITIES ACT, IF APPLICABLE, OR (ii) RULE 144, IF APPLICABLE, AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND, IN THE CASE OF (C)(II) AND (D), THE SELLER FURNISHES TO THE CORPORATION AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE CORPORATION TO SUCH EFFECT.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE CORPORATION IS A “FOREIGN ISSUER” WITHIN THE MEANING OF REGULATION S AT THE TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE “GOOD DELIVERY” MAY BE OBTAINED FROM THE TRANSFER AGENT FOR THE CORPORATION UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE TRANSFER AGENT FOR THE CORPORATION AND THE CORPORATION, AND SUCH OTHER DOCUMENTATION AS MAY BE REASONABLY REQUIRED BY THE CORPORATION OR THE TRANSFER AGENT FOR THE CORPORATION, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT.”
provided that:
4

(i)
if any such securities are being sold under clause (B) above and in compliance with Canadian local laws and regulations, and provided that the Company is a “foreign issuer” within the meaning of Regulation S of the U.S. Securities Act at the time of sale, the legend set forth above may be removed by providing a declaration to the transfer agent for the Company in a form satisfactory to the transfer agent, as may be amended from time to time by the Company, to the effect that such securities are being sold in compliance with Rule 904 of Regulation S of the U.S. Securities Act, together with any documentation as may be required by the Company or its transfer agent to the effect that an exemption from the registration requirements of the U.S. Securities Act or state securities laws are available; and

(ii)
If any such securities are being sold under clause (C)(II) or (D) above, the legend may be removed by delivery to the transfer agent for the Company and the Company of an opinion of counsel, of recognized standing reasonably satisfactory to the Company, that such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws.

4.
Partial Exercise:  The Holder may subscribe for and purchase a number of Warrant Shares less than the maximum number the Holder is entitled to purchase pursuant to the full exercise of this Warrant Certificate. In the event of any such subscription prior to the Expiry Time, the Holder shall be entitled to receive, without charge, a new Warrant Certificate in respect of the balance of the Warrant Shares which the Holder was entitled to subscribe for pursuant to this Warrant Certificate and which were then not purchased.
5.
No Fractional Shares:  Notwithstanding any adjustments provided for in Section 11 hereof or otherwise, the Company shall not be required upon the exercise of any Warrants to issue fractional Warrant Shares in satisfaction of its obligations hereunder and, in any such case, the number of Warrant Shares issuable upon the exercise of any Warrants shall be rounded down to the nearest whole number.
6.
Exchange of Warrant Certificates:  This Warrant Certificate may be exchanged for Warrant Certificates representing in the aggregate the same number of Warrants and entitling the Holder thereof to subscribe for and purchase an equal aggregate number of Warrant Shares at the same Exercise Price and on the same terms as this Warrant Certificate (with or without legends as may be appropriate).
7.
Transfer of Warrants:  Subject to the terms hereof, this Warrant may be transferred, subject to the terms set forth in the Transfer Form attached hereto.  No transfer of this Warrant shall be effective unless this Warrant Certificate is accompanied by a duly executed Transfer Form or other instrument of transfer in such form as the Company may from time to time prescribe, together with such evidence of the genuineness of each endorsement, execution and authorization and of other matters as may reasonably be required by the Company, and delivered to the Company.  No transfer of this Warrant shall be made if in the opinion of counsel to the Company such transfer would result in the violation of any applicable securities laws.  Subject to the foregoing, the Company shall issue and mail as soon as practicable, and in any event within five (5) Business Days of such delivery, a new Warrant Certificate (with or without legends as may be appropriate) registered in the name of the transferee or as the transferee may direct and shall take all other necessary actions to effect the transfer as directed.
8.
Not a Shareholder:  Nothing in this Warrant Certificate or in the holding of a Warrant evidenced hereby shall be construed as conferring upon the Holder any right or interest whatsoever as a shareholder of the Company.
5

9.
No Obligation to Purchase:  Nothing herein contained or done pursuant hereto shall obligate the Holder to subscribe for or the Company to issue any Warrant Shares except those Warrant Shares in respect of which the Holder shall have exercised its right to purchase hereunder in the manner provided herein.
10.
Covenants:
(a)
The Company covenants and agrees that so long as any Warrants evidenced hereby remain outstanding, it shall reserve and there shall remain unissued out of its authorized capital a sufficient number of Warrant Shares to satisfy the right of purchase herein provided for, it will cause the Warrant Shares subscribed for and purchased in the manner herein provided to be issued and delivered as directed and such Warrant Shares shall be issued as fully paid and non-assessable Common Shares and the holders thereof shall not be liable to the Company or to its creditors in respect thereof.
(b)
The Company covenants and agrees that until the Expiry Time, while the Warrants (or remaining portion thereof) shall be outstanding, the Company shall use its best efforts to preserve and maintain its corporate existence and the Company shall take all action as may be necessary to ensure that the issuance of the Warrant Shares upon the exercise of the Warrants is in compliance with all applicable laws and applicable requirements of any exchange on which the Common Shares of the Company may become listed.
(c)
If the issuance of the Warrant Shares upon the exercise of the Warrants requires any filing or registration with or approval of any securities regulatory authority or other governmental authority or compliance with any other requirement under any law before such Warrant Shares may be validly issued (other than the filing of a prospectus or similar disclosure document), the Company agrees to take such actions as may be necessary to secure such filing, registration, approval or compliance, as the case may be.
(d)
The Company will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, all other acts, deeds and assurances in law as may be reasonably required for the better accomplishing and effecting of the intentions and provisions of this Warrant Certificate.
11.
Adjustments:
(a)
Adjustment:  The rights of the holder of this Warrant, including the number of Warrant Shares issuable upon the exercise of such Warrants, will be adjusted from time to time in the events and in the manner provided in, and in accordance with the provisions of, this Section.  The purpose and intent of the adjustments provided for in this Section is to ensure that the rights and obligations of the Holder are neither diminished or enhanced as a result of any of the events set forth in paragraphs (b), (c) or (d) of this Section.  Accordingly, the provisions of this Section shall be interpreted and applied in accordance with such purpose and intent.
(b)
The Exercise Price in effect at any date will be subject to adjustment from time to time as follows:
6

(i)
Share Reorganization:  If and whenever at any time during the Adjustment Period, the Company shall (A) subdivide, redivide or change the outstanding Common Shares into a greater number of Common Shares, (B) consolidate, combine or reduce the outstanding Common Shares into a lesser number of Common Shares, or (C) fix a record date for the issue of Common Shares or securities convertible into or exchangeable for Common Shares to all or substantially all of the holders of Common Shares by way of a stock dividend or other distribution other than a Dividend Paid in the Ordinary Course, then, in each such event, the Exercise Price shall, on the record date for such event or, if no record date is fixed, the effective date of such event, be adjusted so that it will equal the rate determined by multiplying the Exercise Price in effect immediately prior to such date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such date before giving effect to such event, and of which the denominator shall be the total number of Common Shares outstanding on such date after giving effect to such event. Such adjustment shall be made successively whenever any such event shall occur. Any such issue of Common Shares by way of a stock dividend shall be deemed to have been made on the record date for such stock dividend for the purpose of calculating the number of outstanding Common Shares under paragraphs 11(b)(i) and (ii) hereof.
(ii)
Rights Offering:  If and whenever at any time during the Adjustment Period, the Company shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares entitling the holders thereof, within a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares (or securities convertible into or exchangeable for Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price on such record date, then the Exercise Price shall be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus the number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares so offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares so offered for subscription or purchase (or into or for which the convertible or exchangeable securities so offered are convertible or exchangeable). Any Common Shares owned by or held for the account of the Company or any subsidiary of the Company shall be deemed not to be outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is fixed, provided that if two or more such record dates referred to in this paragraph 11(b)(ii) are fixed within a period of 25 Trading Days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates.  To the extent that any such rights, options or warrants are not exercised prior to the expiration thereof, the Exercise Price shall then be readjusted to the Exercise Price which would then be in effect based upon the number of Common Shares (or securities convertible into or exchangeable for Common Shares) actually issued upon the exercise of such rights, options or warrants, as the case may be.

7

(iii)
Distribution:  If and whenever at any time during the Adjustment Period, the Company shall fix a record date for the making of a distribution to all or substantially all of the holders of Common Shares of (A) shares of any class other than Common Shares whether of the Company or any other corporation, (B) rights, options or warrants to acquire Common Shares or securities exchangeable for or convertible into Common Shares or property or other assets of the Company (other than a Rights Offering as described above), (C) evidences of indebtedness, or (D) cash, securities or other property or assets then, in each such case and if such distribution does not constitute a Dividend Paid in the Ordinary Course, or fall under clauses (i) or (ii) above, the Exercise Price will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price on the earlier of such record date and the date on which the Company announces its intention to make such distribution, less the aggregate fair market value (as determined by the directors, acting reasonably, at the time such distribution is authorized) of such shares or rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets so distributed, and of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price.  Any Common Shares owned by or held for the account of the Company or any subsidiary of the Company shall be deemed not to be outstanding for the purpose of any such computation.  Such adjustment shall be made successively whenever such a record date is fixed, provided that if two or more such record dates referred to in this paragraph 11(b)(iii) are fixed within a period of 25 Trading Days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates.  To the extent that any such rights, options or warrants so distributed are not exercised prior to the expiration thereof, the Exercise Price shall then be readjusted to the Exercise Price which would then be in effect based upon such rights, options or warrants or evidences of indebtedness or cash, securities or other property or assets actually distributed or based upon the number or amount of securities or the property or assets actually issued or distributed upon the exercise of such rights, options or warrants, as the case may be.
(c)
Reclassifications:  If and whenever at any time during the Adjustment Period, there is (A) any reclassification of or amendment to the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Company (other than as described in subsection 11(b) hereof), (B) any consolidation, amalgamation, arrangement, merger or other form of business combination of the Company with or into any other corporation resulting in any reclassification of the outstanding Common Shares, any change of the Common Shares into other shares or any other reorganization of the Company, or (C) any sale, lease, exchange or transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to another corporation or entity, then, in each such event, the Holder of this Warrant which is thereafter exercised shall be entitled to receive, and shall accept, in lieu of the number of Common Shares to which such Holder was theretofore entitled upon such exercise, the kind and number or amount of shares or other securities or property which such Holder would have been entitled to receive as a result of such event if, on the effective date thereof, such Holder had been the registered holder of the number of Common Shares to which such Holder was theretofore entitled upon such exercise. If necessary as a result of any such event, appropriate adjustments will be made in the application of the provisions set forth in this subsection with respect to the rights and interests thereafter of the Holder of this Warrant Certificate to the end that the provisions set forth in this subsection will thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares or other securities or property thereafter deliverable upon the exercise of this Warrant.  Any such adjustments will be made by and set forth in an instrument supplemental hereto approved by the directors, acting reasonably, and shall for all purposes be conclusively deemed to be an appropriate adjustment.
8

(d)
If at any time during the Adjustment Period any adjustment or readjustment in the Exercise Price shall occur pursuant to the provisions of subsection 11(b) or 11(c) of this Warrant Certificate, then the number of Warrant Shares purchasable upon the subsequent exercise of the Warrants shall be simultaneously adjusted or readjusted, as the case may be, by multiplying the number of Warrant Shares purchasable upon the exercise of the Warrants immediately prior to such adjustment or readjustment by a fraction which shall be the reciprocal of the fraction used in the adjustment or readjustment of the Exercise Price.
12.
Rules Regarding Calculation of Adjustment of Exercise Price:
(a)
The adjustments provided for in Section 11 are cumulative and will, in the case of adjustments to the Exercise Price, be computed to the nearest whole Warrant Share and will be made successively whenever an event referred to therein occurs, subject to the following subsections of this Section 12.
(b)
No adjustment in the Exercise Price is required to be made unless such adjustment would result in a change of at least 1% in the prevailing Exercise Price and no adjustment in the Exercise Price is required unless such adjustment would result in a change of at least one one-hundredth of a Warrant Share; provided, however, that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, will be carried forward and taken into account in any subsequent adjustments.
(c)
No adjustment in the Exercise Price will be made in respect of any event described in Section 11, other than the events referred to in clauses 11(1)(c), if the Holder is entitled to participate in such event on the same terms, mutatis mutandis, as if the Holder had exercised this Warrant prior to or on the effective date or record date of such event.
(d)
No adjustment in the Exercise Price will be made under Section 11 in respect of the issue from time to time of Common Shares issuable from time to time as Dividends Paid in the Ordinary Course to holders of Common Shares who exercise an option or election to receive substantially equivalent dividends in Common Shares in lieu of receiving a cash dividend.
(e)
If at any time a question or dispute arises with respect to adjustments provided for in Section 11, such question or dispute will be conclusively determined by the auditor of the Company or, if they are unable or unwilling to act, by such other firm of independent chartered accountants as may be selected by action of the directors of the Company and any such determination, subject to regulatory approval and absent manifest error, will be binding upon the Company and the Holder. The Company will provide such auditor or chartered accountant with access to all necessary records of the Company.

9

(f)
In case the Company after the date of issuance of this Warrant takes any action affecting the Common Shares, other than action described in Section 11, which in the opinion of the board of directors of the Company would materially affect the rights of the Holder, the Exercise Price will be adjusted in such manner, if any, and at such time, by action of the directors of the Company in their sole discretion, acting reasonably and in good faith, but subject in all cases to any necessary regulatory approval. Failure of the taking of action by the directors of the Company so as to provide for an adjustment on or prior to the effective date of any action by the Company affecting the Common Shares will be conclusive evidence that the board of directors of the Company has determined that it is equitable to make no adjustment in the circumstances.
(g)
If the Company sets a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or sets a record date to take any other action and, thereafter and before the distribution to such shareholders of any such dividend or distribution or the taking of any other action, decides not to implement its plan to pay or deliver such dividend or distribution or take such other action, then no adjustment in the Exercise Price will be required by reason of the setting of such record date.
(h)
In the absence of a resolution of the directors of the Company fixing a record date for any event which would require any adjustment to this Warrant, the Company will be deemed to have fixed as the record date therefor the date on which the event is effected.
(i)
As a condition precedent to the taking of any action which would require any adjustment to the Warrant Shares issuable under this Warrant, including the Exercise Price, the Company shall take any corporate action which may be necessary in order that the Company or any successor to the Company or successor to the undertaking or assets of the Company have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities which the Holder is entitled to receive on the full exercise thereof in accordance with the provisions hereof.
(j)
The Company will from time to time, immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 11, forthwith give notice to the Holder specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Exercise Price.
(k)
The Company covenants to and in favour of the Holder that so long as this Warrant remains outstanding, it will give notice to the Holder of the effective date or of its intention to fix a record date for any event referred to in Section 11 whether or not such action would give rise to an adjustment in the Exercise Price or the number and type of securities issuable upon the exercise of the Warrants, and, in each case, such notice shall specify the particulars of such event and the record date and the effective date for such event; provided that the Company shall only be required to specify in such notice such particulars of such event as have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than 14 days in each case prior to such applicable record date or effective date.
10

(l)
In any case that an adjustment pursuant to Section 11 shall become effective immediately after a record date for or an effective date of an event referred to herein, the Company may defer, until the occurrence and consummation of such event, issuing to the Holder of this Warrant, if exercised after such record date or effective date and before the occurrence and consummation of such event, the additional Warrant Shares or other securities or property issuable upon such exercise by reason of the adjustment required by such event, provided, however, that the Company will deliver to the Holder an appropriate instrument evidencing the Holder’s right to receive such additional Warrant Shares or other securities or property upon the occurrence and consummation of such event and the right to receive any dividend or other distribution in respect of such additional Warrant Shares or other securities or property declared in favour of the holders of record of Common Shares or of such other securities or property on or after the Exercise Date or such later date as the Holder would, but for the provisions of this subsection, have become the holder of record of such additional Warrant Shares or of such other securities or property.
13.
Representation and Warranty:  The Company hereby represents and warrants with and to the Holder that the Company is duly authorized and has all corporate and lawful power and authority to create and issue this Warrant and the Warrant Shares issuable upon the exercise hereof and perform its obligations hereunder and that this Warrant Certificate represents a valid, legal and binding obligation of the Company enforceable in accordance with its terms.
14.
If Share Transfer Books ClosedThe Company shall not be required to deliver certificates for Warrant Shares while the share transfer books of the Company are properly closed, prior to any meeting of shareholders or for the payment of dividends or for any other purpose and in the event of the surrender of any Warrant in accordance with the provisions hereof and the making of any subscription and payment for the Warrant Shares called for thereby during any such period delivery of certificates for Warrant Shares may be postponed for a period not exceeding three (3) Business Days after the date of the re-opening of said share transfer books provided that any such postponement of delivery of certificates shall be without prejudice to the right of the Holder, if the Holder has surrendered the same and made payment during such period, to receive such certificates for the Warrant Shares called for after the share transfer books shall have been re-opened.
15.
Lost Certificate:  If the Warrant Certificate evidencing the Warrants issued hereby becomes stolen, lost, mutilated or destroyed the Company shall issue and countersign a new Warrant Certificate of like denomination, tenor and date as the Warrant Certificate so stolen, lost mutilated or destroyed provided that the Holder shall bear the reasonable cost of the issue thereof and in case of loss, destruction or theft, shall, as a condition precedent to the issue thereof, furnish to the Company such evidence of ownership and of the loss, destruction or theft of the Warrant Certificate as shall be satisfactory to the Company, in its sole discretion acting reasonably, and the Holder may also be required to furnish an indemnity in form satisfactory to the Company, in its sole discretion acting reasonably, and shall pay the reasonable charges of the Company in connection therewith.
16.
Change of Control:   If a Change of Control shall or is proposed to occur prior to the Expiry Date, the Company will procure that an offer to participate in such Change of Control is made to all Holders in respect of all outstanding Warrants.  Such offer will enable all Holders to participate (in whole or in part) at their election in such Change of Control by exercising their Warrants with the resulting Common Shares participating on the same terms as all other Common Shares of the Company.  The Company will use all reasonable endeavours to assist Holders to participate to the fullest extent that they wish in the Change of Control including agreeing to a reduced period of time for notice of exercise of Warrants, issuing the arising Common Shares promptly to enable participation and, in respect of a Change of Control where holders of Common Shares will receive a cash payment, establishing a mechanism whereby the Holder will not be required to pay the Exercise Price to the Company prior to receipt of the consideration under the Change of Control (ie the Company will procure an agreement between the Holder and the offeror under the Change of Control for the arising Common Shares to participate in the Change of Control with the offeror to pay the Company the Exercise Price for each relevant Common Share participating due to the exercise of the Warrants and the Holder to receive the difference between the consideration per Common Share and the Exercise Price).  For the avoidance of doubt, the Holder will hold the right to elect whether their Warrants participate in whole or part in a Change of Control.  
11

17.
Governing Law:  This Warrant shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable therein but the reference to such laws shall not, by conflict of laws, rules or otherwise, require the application of the law of any jurisdiction other than the Province of Ontario.
18.
Severability:  If any one or more of the provisions or parts thereof contained in this Warrant Certificate should be or become invalid, illegal or unenforceable in any respect in any jurisdiction, the remaining provisions or parts thereof contained herein shall be and shall be conclusively deemed to be, as to such jurisdiction, severable therefrom.
19.
Amendments:  The provisions of these Warrants may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to in writing by the Company and the holders of at least 80% of the Warrants then outstanding.
20.
Headings:  The headings of the articles, sections, subsections and clauses of this Warrant Certificate have been inserted for convenience and reference only and do not define, limit, alter or enlarge the meaning of any provision of this Warrant Certificate.
21.
Numbering of Articles, etc.:  Unless otherwise stated, a reference herein to a numbered or lettered article, section, subsection, clause, subclause or schedule refers to the article, section, subsection, clause, subclause or schedule bearing that number or letter in this Warrant Certificate.
22.
Gender:  Whenever used in this Warrant Certificate, words importing the singular number only shall include the plural, and vice versa, and words importing the masculine gender shall include the feminine gender.
23.
Day not a Business Day:  In the event that any day on or before which any action is required to be taken hereunder is not a Business Day, then such action shall be required to be taken on or before the requisite time on the next succeeding day that is a Business Day.
24.
Binding Effect:  This Warrant Certificate and all of its provisions shall enure to the benefit of the Holder, its successors, assigns and legal personal representatives and shall be binding upon the Company and its successors.

12

25.
Notice:  Unless herein otherwise expressly provided, a notice to be given hereunder will be deemed to be validly given if the notice is sent by telecopier or prepaid same day courier addressed as follows:
(a)
If to the Holder at the latest address of the Holder as recorded on the books of the Company; and
(b)
If to the Company at:
FLORA GROWTH CORP.
65 Queen Street West
Suite 805
Toronto, ON  M5H 2M5

Attention: Corporate Secretary
Facsimile No.: (416) 861-8165
26.
Time of Essence:  Time shall be of the essence hereof.
13

IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be signed by its duly authorized officer as of this •th day of •, 2019.

 
FLORA GROWTH CORP.
 
Per:
 
   
Authorized Signing Officer
14


SUBSCRIPTION FORM

TO:
FLORA GROWTH CORP.
65 Queen Street West
Suite 805
Toronto, ON  M5H 2M5

The undersigned holder of the within Warrant hereby irrevocably subscribes for                                    Warrant Shares of FLORA GROWTH CORP. (the “Company”) pursuant to the within Warrant and tenders herewith a certified cheque or bank draft for USD$                                 (CAD$0.05 per Warrant Share) in full payment therefor.
(Please check the ONE box applicable):
A  The undersigned holder (i) at the time of exercise of the Warrant is not in the United States; (ii) is not a “U.S. person” as defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), (iii) is not exercising the Warrant on behalf of a “U.S. person”; and (iv) did not execute or deliver this exercise form in the United States.
B.  The undersigned holder is the original U.S. Purchaser and (a) purchased the Units (of which the Warrants were a part) directly from the Company pursuant to a subscription agreement for the purchase of Units; (b) is exercising the Warrants solely for its own account or for the account of the original beneficial purchaser, if any; (c) each of it and any beneficial purchaser was on the date the Units was purchased from the Company, and is on the date of exercise of the Warrants, an “accredited investor” (as defined in Rule 501(a) of Regulation D under the U.S. Securities Act; and (d) the representations, warranties and covenants set forth in the written subscription agreement for the purchase of Units from the Corporation continue to be true and correct.
C.  The undersigned holder is a U.S. person and has delivered to the Company an opinion of counsel (which will not be sufficient unless it is from counsel of recognized standing and in form and substance satisfactory to the Company) to the effect that an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available.

The undersigned hereby directs that the Warrant Shares be issued as follows:

NAME(S) IN FULL

ADDRESS(ES)
NUMBER OF
WARRANT SHARES
     
     
     

15



DATED this                    day of                                                     , 20      .
 
NAME:
 
     
 
Signature of Authorized Representative:
 
 
Print Name:
 
 
Print Address:
 

                Please check if the certificates representing the Warrant Shares are to be delivered at the office where this Warrant Certificate is surrendered, failing which the certificates representing the Warrant Shares will be mailed to the address in the registration instructions set out above.
If any Warrants represented by this Warrant Certificate are not being exercised, a new Warrant Certificate representing the unexercised Warrants will be issued and delivered with the certificate representing the Warrant Shares.
Notes:
Certificates will not be registered or delivered to an address in the United States unless Box B or Box C above is checked.
If Box C is to be checked, holders are encouraged to consult with the Company in advance to determine that the legal opinion tendered in connection with exercise will be satisfactory in form and substance to the Company.

16

TRANSFER FORM

FOR VALUE RECEIVED, the undersigned transferor hereby sells, assigns and transfers unto
 

(Transferee)
 

(Address)
 

(Social Insurance Number)

              of the Warrants registered in the name of the undersigned transferor represented by the attached Warrant Certificate.

THE UNDERSIGNED TRANSFEROR HERBY CERTIFIES AND DECLARES that the Warrants are not being offered, sold or transferred to, or for the account or benefit of, a U.S. Person (as defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”)) or a person within the United States unless registered under the U.S. Securities Act and any applicable state securities laws or unless an exemption from such registration is available.

DATED this                    day of                          ,             .

 
 
 
 
 
 Signature of Registered Holder
(Transferor)
 
 Signature Guarantee
 
 
 
 
       
 
 Print name of Registered Holder
 
 
 
 
 
 
       
 
 

   
   Address    
    
 

  
  

 
NOTE:
The signature on this transfer form must correspond with the name as recorded on the face of the Warrant Certificate in every particular without alteration or enlargement or any change whatsoever or this transfer form must be signed by a duly authorized trustee, executor, administrator, curator, guardian, attorney of the Holder or a duly authorized signing officer in the case of a corporation  If this transfer form is signed by any of the foregoing, or any person acting in a fiduciary or representative capacity, the Warrant Certificate must be accompanied by evidence of authority to sign.


17


Broker-Dealer Agreement
This agreement (together with exhibits and schedules, the “Agreement”) is entered into by and between FLORA GROWTH CORP. (“Client”) an Ontario, Canada Corporation, and Dalmore Group, LLC., a New York Limited Liability Company (“Dalmore”).  Client and Dalmore agree to be bound by the terms of this Agreement, effective of September 6, 2019 (the “Effective Date”):
Whereas, Dalmore is a registered broker-dealer providing services in the equity and debt securities market, including offerings conducted via SEC approved exemptions such as Reg D 506(b), 506(c), Regulation A+, Reg CF and others;
Whereas, Client is offering securities directly to the public in an offering exempt from registration under Regulation A+ (the “Offering”); and
Whereas, Client recognizes the benefit of having Dalmore as a broker/dealer for investors who participate in the Offering (“Investors”).
Now, Therefore, in consideration of the mutual promises and covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Appointment, Term, and Termination
a. Client hereby engages and retains Dalmore to provide operations and compliance services at Client’s discretion.
b. The Agreement will commence on the Effective Date and will remain in effect for a period of twelve (12) months and will renew automatically for successive renewal terms of twelve (12) months each unless any party provides notice to the other party of non-renewal at least thirty (30) days prior to the expiration of the current term.  If Client defaults in performing the obligations under this Agreement, the Agreement may be terminated (i) upon sixty (60) days written notice if Client fails to perform or observe any material term, covenant or condition to be performed or observed by it under this Agreement and such failure continues to be unremedied, (ii) upon written notice, if any material representation or warranty made by either Provider or Client proves to be incorrect at any time in any material respect, (iii) in order to comply with a Legal Requirement, if compliance cannot be timely achieved using commercially reasonable efforts, after providing as much notice as practicable, or (iv) upon thirty (30) days’ written notice if Client or Dalmore commences a voluntary proceeding seeking liquidation, reorganization or other relief, or is adjudged bankrupt or insolvent or has entered against it a final and unappeable order for relief, under any bankruptcy, insolvency or other similar law, or either party executes and delivers a general assignment for the benefit of its creditors. The description in this section of specific remedies will not exclude the availability of any other remedies.  Any delay or failure by Client to exercise any right, power, remedy or privilege will not be construed to be a waiver of such right, power, remedy or privilege or to limit the exercise of such right, power, remedy or privilege.  No single, partial or other exercise of any such right, power, remedy or privilege will preclude the further exercise thereof or the exercise of any other right, power, remedy or privilege.  All terms of the Agreement, which should reasonably survive termination, shall so survive, including, without limitation, limitations of liability and indemnities, and the obligation to pay Fees relating to Services provided prior to termination.

The Dalmore Group LLC
525 Green Place Woodmere, NY 11598
t. 917.319.3000 • f. 516.706.1875

2. Services. Dalmore will perform the services listed on Exhibit A attached hereto and made a part hereof, in connection with the Offering (the “Services”).  Unless otherwise agreed to in writing by the parties.
3. Compensation. As compensation for the Services, Client shall pay to Dalmore a fee equal to 3% on the aggregate amount raised by the Client from Investors only in the states in which Dalmore acts as the broker/dealer of record. Those states are Washington, Arizona, Texas, Alabama, North Dakota, Florida and New Jersey. Client will be deemed to sell issuer direct in all the other states and Dalmore will not be responsible for any broker/dealer services in those states and will not be entitled to any compensation on any money raised in those states.

There will also be a one time advance set up fee of $25,000. Fee is due and payable upon execution of this agreement.  The advance fee will cover expenses anticipated to be incurred by the firm such a preparing the FINRA filing, working with the Client’s SEC counsel in providing information to the extent necessary, coordination with any third party vendors involved in the offering and any other services necessary and required prior to the approval of the offering. The firm will refund any fee related to the advance to the extent it was not used, incurred or provided to the Client.
4. Regulatory Compliance

a.  Client and all its third party providers shall at all times (i) comply with direct requests of Dalmore; (ii) maintain all required registrations and licenses, including foreign qualification, if necessary; and (iii) pay all related fees and expenses (including the FINRA Corporate Filing  Fee), in each case that are necessary or appropriate to perform their respective obligations under this Agreement.  Client shall comply with and adhere to all Dalmore policies and procedures.

FINRA Corporate Filing Fee for this $50,000,000 best effort offering will be $8,000 and will be a pass through fee payable to Dalmore, from the Client, who will then forward it to FINRA as payment for the filing.

b. Client and Dalmore will have the shared responsibility for the review of all documentation related to the Transaction but the ultimate discretion about accepting a client will be the sole decision of the Client. Each Investor will be considered to be that of the Client’s and NOT Dalmore.

c. Client and Dalmore will each be responsible for supervising the activities and training of their respective sales employees, as well as all of their other respective employees in the performance of functions specifically allocated to them pursuant to the terms of this Agreement.

d. Client and Dalmore agree to promptly notify the other concerning any material communications from or with any Governmental Authority or Self Regulatory Organization with respect to this Agreement or the performance of its obligations, unless such notification is expressly prohibited by the applicable Governmental Authority.


5. Role of Dalmore.  Client acknowledges and agrees that Client will rely on Client’s own judgment in using Dalmore’s Services.  Dalmore (i) makes no representations with respect to the quality of any investment opportunity or of any issuer; (ii) does not guarantee the performance to and of any Investor; (iii) will make commercially reasonable efforts to perform the Services in accordance with its specifications; (iv) does not guarantee the performance of any party or facility which provides connectivity to Dalmore; and (v) is not an investment adviser, does not provide investment advice and does not recommend securities transactions and any display of data or other information about an investment opportunity, does not constitute a recommendation as to the appropriateness, suitability, legality, validity or profitability of any transaction.  Nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship of any kind.

6. Indemnification.

a. Indemnification by Client.  Client shall indemnify and hold Dalmore, its affiliates and their representatives and agents harmless from, any and all actual or direct losses, liabilities, judgments, arbitration awards, settlements, damages and costs (collectively, “Losses”),  resulting from or arising out of any third party suits, actions, claims, demands or similar proceedings (collectively, “Proceedings”) to the extent they are based upon (i) a breach of this Agreement by Client, (ii) the wrongful acts or omissions of Client, or (iii) the Offering.
b. Indemnification by Dalmore.  Dalmore shall indemnify and hold Client, Client’s affiliates and Client’s representatives and agents harmless from any Losses resulting from or arising out of Proceedings to the extent they are based upon (i) a breach of this Agreement by Dalmore, or (ii) the wrongful acts or omissions of Client.
c. Indemnification Procedure.  If any Proceeding is commenced against a party entitled to indemnification under this section, prompt notice of the Proceeding shall be given to the party obligated to provide such indemnification.  The indemnifying party shall be entitled to take control of the defense, investigation or settlement of the Proceeding and the indemnified party agrees to reasonably cooperate, at the indemnifying party's cost in the ensuing investigations, defense or settlement.
7. Notices.  Any notices required by this Agreement shall be in writing and shall be addressed, and delivered or mailed postage prepaid, or faxed or emailed to the other parties hereto at such addresses as such other parties may designate from time to time for the receipt of such notices.  Until further notice, the address of each party to this Agreement for this purpose shall be the following:


If to the Client:

FLORA GROWTH CORP.
65 Queen Street West
Unit 800
Toronto, Ontario M5H 2M5
Attn: Damian Lopez, CEO
Damian.Lopez@floragroth.ca

If to Dalmore:

Dalmore Group, LLC
525 Green Place
Woodmere, NY 11598
Attn:  Etan Butler, Chairman
etan@dalmorefg.com

8.Confidentiality and Mutual Non-Disclosure:
    a.   Confidentiality
i.
  Included Information. For purposes of this Agreement, the term “Confidential Information” means all confidential and proprietary information of a party, including but not limited to (i) financial information, (ii) business and marketing plans, (iii) the names of employees and owners, (iv) the names and other personally-identifiable information of users of the Portal, (v) security codes, and (vi) all documentation provided by Client or Investor.
ii.
  Excluded Information. For purposes of this Agreement, the term “confidential and proprietary information” shall not include (i) information already known or independently developed by the recipient without the use of any confidential and proprietary information, or (ii) information known to the public through no wrongful act of the recipient.
iii.
  Confidentiality Obligations. During the Term and at all times thereafter, neither party shall disclose Confidential Information of the other party or use such Confidential Information for any purpose without the prior written consent of such other party. Without limiting the preceding sentence, each
   

 
 

party shall use at least the same degree of care in safeguarding the other party’s Confidential Information as it uses to safeguard its own Confidential Information. Notwithstanding the foregoing, a party may disclose Confidential Information (i) if required to do by order of a court of competent jurisdiction, provided that such party shall notify the other party in writing promptly upon receipt of knowledge of such order so that such other party may attempt to prevent such disclosure or seek a protective order; or (ii) to any applicable governmental authority as required by applicable law.  Nothing contained herein shall be construed to prohibit the SEC, FINRA, or other government official or entities from obtaining, reviewing, and auditing any information, records, or data. Issuer acknowledges that regulatory record-keeping requirements, as well as securities industry best practices, require Provider to maintain copies of practically all data, including communications and materials, regardless of any termination of this Agreement.
9. Miscellaneous.
a. ANY DISPUTE OR CONTROVERSY BETWEEN THE CLIENT AND PROVIDER RELATING TO OR ARISING OUT OF THIS AGREEMENT WILL BE SETTLED BY ARBITRATION BEFORE AND UNDER THE RULES OF THE ARBITRATION COMMITIEE OF FINRA.

b. This Agreement is non-exclusive and shall not be construed to prevent either party from engaging in any other business activities

c. This Agreement will be binding upon all successors, assigns or transferees of Client.  No assignment of this Agreement by either party will be valid unless the other party consents to such an assignment in writing. Either party may freely assign this Agreement to any person or entity that acquires all or substantially all of its business or assets. Any assignment by the either party to any subsidiary that it may create or to a company affiliated with or controlled directly or indirectly by it will be deemed valid and enforceable in the absence of any consent from the other party.

d. Neither party will, without prior written approval of the other party, place or agree to place any advertisement in any website, newspaper, publication, periodical or any other media or communicate with the public in any manner whatsoever if such advertisement or communication in any manner makes reference to the other party, to any person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control, with the other party and to the clearing arrangements and/or any of the Services embodied in this Agreement.  Client and Dalmore will work together to authorize and approve co-branded notifications and client facing communication materials regarding the representations in this Agreement.  Notwithstanding any provisions to the contrary within, Client agrees that Dalmore may make reference in marketing or other materials to any transactions completed during the term of this Agreement, provided no personal data or Confidential Information is disclosed in such materials.

e. THE CONSTRUCTION AND EFFECT OF EVERY PROVISION OF THIS AGREEMENT, THE RIGHTS OF THE PARTIES UNDER THIS AGREEMENT AND ANY QUESTIONS ARISING OUT OF THE AGREEMENT, WILL BE SUBJECT TO THE STATUTORY AND COMMON LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.  The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party.


f. If any provision or condition of this Agreement will be held to be invalid or unenforceable by any court, or regulatory or self-regulatory agency or body, the validity of the remaining provisions and conditions will not be affected and this Agreement will be carried out as if any such invalid or unenforceable provision or condition were not included in the Agreement.

g. This Agreement sets forth the entire agreement between the parties with respect to the subject matter hereof and supersedes any prior agreement relating to the subject matter herein. The Agreement may not be modified or amended except by written agreement.

h. This Agreement may be executed in multiple counterparts and by facsimile or electronic means, each of which shall be deemed an original but all of which together shall constitute one and the same agreement.

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]





IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

CLIENT: FLORA GROWTH CORP.


By Damian Lopez
Name:        Damian Lopez
Its:             CEO


DALMORE GROUP, LLC:


By Etan Butler 
Name:         Etan Butler
Its: Chairman











Exhibit A

Services:
a.
Dalmore Responsibilities – Dalmore agrees to:

i.
Review investor information, including KYC (Know Your Customer) data, perform AML (Anti-Money Laundering) and other compliance background checks, and provide a recommendation to Client whether or not to accept investor as a customer of the Client in the  following states: Washington, North Dakota, Arizona, Texas, Alabama, New Jersey and Florida;
ii.
Review each investors subscription agreement to confirm such Investors participation in the offering, and provide a recommendation to Client whether or not to accept the use of the subscription agreement for the Investors participation;
iii.
Contact and/or notify the issuer, if needed, to gather additional information or clarification on an investor in states where Dalmore is acting as broker/dealer of record;
iv.
Keep investor details and data confidential and not disclose to any third-party except as required by regulators or in our performance under this Agreement (e.g. as needed for AML and background checks);
v.
Provide operations, compliance and other services in order to secure funding for the offering;
vi.
Coordinate with third party providers to ensure adequate review and compliance.




DALV CONSULTING, LLC

CONSULTING AGREEMENT

This Consulting Agreement (“Agreement”) is entered into effective as of September 6, 2019 by and between FLORA GROWTH CORP. (“Client”) An Ontario , Canada Corporation, together with its subsidiaries and affiliates existing now or in the future (collectively the “Company”) and DALV Consulting, LLC (“Consultant”), a Pennsylvania Limited Liability Company.  The Company desires to retain Consultant as an independent contractor to perform consulting services for the Company, and Consultant is willing to perform such services, on the terms described below.  In consideration of the mutual promises contained herein, the parties agree as follows:
1. Services and Compensation.  Consultant agrees to perform for the Company the services described in Exhibit A (the “Services”), and the Company agrees to pay Consultant the compensation described in Exhibit A for Consultant’s performance of the Services.
2. Confidentiality.
A. Definition.  “Confidential Information” means any non-public information that relates to the actual or anticipated business or research and development of the Company, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding Company’s products or services and markets therefore, customer lists and customers (including, but not limited to, customers of the Company on whom Consultant called or with whom Consultant became acquainted during the term of Consultant’s engagement), software, developments, inventions, processes, formulas, technology, designs, drawing, engineering, hardware configuration information, marketing, finances or other business information.  Confidential Information does not include information that (i) is known to Consultant at the time of disclosure to Consultant by the Company as evidenced by written records of Consultant, (ii) has become publicly known and made generally available through no wrongful act of Consultant or (iii) has been rightfully received by Consultant from a third party who is authorized to make such disclosure.
B. Nonuse and Nondisclosure.  Consultant will not, during or subsequent to the term of this Agreement, (i) use the Confidential Information for any purpose whatsoever other than the performance of the Services on behalf of the Company or (ii) disclose the Confidential Information to any third party.  Consultant agrees that all Confidential Information will remain the sole property of the Company.  Consultant also agrees to take all reasonable precautions to prevent any unauthorized disclosure of such Confidential Information, including, but not limited to, having each of Consultant’s employees and contractors, if any, with access to any Confidential Information execute a nondisclosure agreement. Without the Company’s prior written approval, Consultant will not directly or indirectly disclose to anyone the existence of this Agreement or the fact that Consultant has this arrangement with the Company.
C. Former Client Confidential Information.  Consultant agrees that Consultant will not, during the term of this Agreement, improperly use or disclose any proprietary information or trade secrets of any former or current employer of Consultant or other person or entity with which Consultant has an agreement or duty to keep in confidence information acquired by Consultant, if any.  Consultant also agrees that Consultant will not bring onto the Company’s premises any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.
D. Third Party Confidential Information.  Consultant recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes.  Consultant agrees that, during the term of this Agreement and thereafter, Consultant owes the Company and such third parties a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out the Services for the Company consistent with the Company’s agreement with such third party.

E. Return of Materials.  Upon the termination of this Agreement, or upon Company’s earlier request, Consultant will deliver to the Company all of the Company’s property, including but not limited to all electronically stored information and passwords to access such property, or Confidential Information that Consultant may have in Consultant’s possession or control.
3. Ownership.
A. Assignment.  Consultant agrees that all copyrightable material, notes, records, drawings, designs, inventions, improvements, developments, discoveries and trade secrets conceived, discovered, developed or reduced to practice by Consultant, solely or in collaboration with others, during Consultant’s provision of services to the Company prior to the date hereof, and during the term of this Agreement, that relate in any manner to the business of the Company that Consultant may be directed to undertake, investigate or experiment with or that Consultant may become associated with in work, investigation or experimentation in the Company’s line of business in performing the Services under this Agreement (collectively, “Inventions”), are the sole property of the Company.  Consultant also agrees to assign (or cause to be assigned) and hereby assigns fully to the Company all Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating to all Inventions.
B. Further Assurances.  Consultant agrees to assist Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating to all Inventions in any and all countries, including the disclosure to the Company of all pertinent information and data with respect to all Inventions, the execution of all applications, specifications, oaths, assignments and all other instruments that the Company may deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns and nominees the sole and exclusive right, title and interest in and to all Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating to all Inventions.  Consultant also agrees that Consultant’s obligation to execute or cause to be executed any such instrument or papers shall continue after the termination of this Agreement.
C. Pre-Existing Materials.  Subject to Section 3.A, Consultant agrees that if, in the course of performing the Services, Consultant incorporates into any Invention developed under this Agreement any pre-existing invention, improvement, development, concept, discovery or other proprietary information owned by Consultant or in which Consultant has an interest, (i) Consultant will inform Company, in writing before incorporating such invention, improvement, development, concept, discovery or other proprietary information into any Invention, and (ii) the Company is hereby granted a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license to make, have made, modify, use and sell such item as part of or in connection with such Invention.  Consultant will not incorporate any invention, improvement, development, concept, discovery or other proprietary information owned by any third party into any Invention without Company’s prior written permission.
D. Attorney-in-Fact.  Consultant agrees that, if the Company is unable because of Consultant’s unavailability, dissolution, mental or physical incapacity, or for any other reason, to secure Consultant’s signature for the purpose of applying for or pursuing any application for any United States or foreign patents or mask work or copyright registrations covering the Inventions assigned to the Company in Section 3.A, then Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Consultant’s agent and attorney-in-fact, to act for and on Consultant’s behalf to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyright and mask work registrations with the same legal force and effect as if executed by Consultant.
4. Conflicting Obligations.
A. Conflicts.  Consultant certifies that Consultant has no outstanding agreement or obligation that is in conflict with any of the provisions of this Agreement or that would preclude Consultant from complying with the provisions of this Agreement.  Consultant will not enter into any such conflicting agreement during the term of this Agreement.  Consultant’s violation of this Section 4.A will be considered a material breach under Section 6.B.
B. Substantially Similar Designs.  In view of Consultant’s access to the Company’s trade secrets and proprietary know-how, Consultant agrees that Consultant will not, without Company’s prior written approval, design identical or substantially similar designs as those developed under this Agreement for any third party during the term of this Agreement and for a period of 12 months after the termination of this Agreement.  Consultant acknowledges that the obligations in this Section 4 are ancillary to Consultant’s nondisclosure obligations under Section 2.

5. Reports.  Consultant also agrees that Consultant will, from time to time during the term of this Agreement or any extension thereof, keep the Company advised as to Consultant’s progress in performing the Services under this Agreement.  Consultant further agrees that Consultant will, as requested by the Company, prepare written reports with respect to such progress.  The Company and Consultant agree that the time required to prepare such written reports will be considered time devoted to the performance of the Services.
6. Term.
A. Term.  The initial term of this Agreement will begin on the date hereof and continue for the later of (i) two (2) months thereafter (the “Initial Term”) or (ii) until the Reg A+ offering referenced in Exhibit A is terminated by the Company.
B. Survival.  Upon such termination, all rights and duties of the Company and Consultant toward each other shall cease except:
(1) The Company will pay the full balance due, within 30 days after the effective date of termination, all amounts owing to Consultant for Services completed and accepted by the Company prior to the termination date and related expenses, if any, submitted in accordance with the Company’s policies and in accordance with the provisions of Section 1 of this Agreement; and
(2) Section 2 (Confidentiality), Section 3 (Ownership), Section 4 (Conflicting Obligations), Section 7 (Independent Contractor; Benefits), Section 8 (Indemnification) and Section 10 (Arbitration and Equitable Relief) will survive termination of this Agreement.
7. Independent Contractor; Benefits.
A. Independent Contractor.  It is the express intention of the Company and Consultant that Consultant perform the Services as an independent contractor to the Company.  Nothing in this Agreement shall in any way be construed to constitute Consultant as an agent, employee or representative of the Company.  Without limiting the generality of the foregoing, Consultant is not authorized to bind the Company to any liability or obligation or to represent that Consultant has any such authority.  Consultant agrees to furnish (or reimburse the Company for) all tools and materials necessary to accomplish this Agreement and shall incur all expenses associated with performance, except as expressly provided in Exhibit A.  Consultant acknowledges and agrees that Consultant is obligated to report as income all compensation received by Consultant pursuant to this Agreement.  Consultant agrees to and acknowledges the obligation to pay all self-employment and other taxes on such income.
B. Benefits.  The Company and Consultant agree that Consultant will receive no Company-sponsored benefits from the Company.  If Consultant is reclassified by a state or federal agency or court as Company’s employee, Consultant will become a reclassified employee and will receive no benefits from the Company, except those mandated by state or federal law, even if by the terms of the Company’s benefit plans or programs of the Company in effect at the time of such reclassification, Consultant would otherwise be eligible for such benefits.
8. Indemnification.  Consultant agrees to indemnify and hold harmless the Company and its directors, officers and employees from and against all taxes, losses, damages, liabilities, costs and expenses, including attorneys’ fees and other legal expenses, arising directly or indirectly from or in connection with (i) any negligent, reckless or intentionally wrongful act of Consultant or Consultant’s assistants, employees or agents, (ii) a determination by a court or agency that the Consultant is not an independent contractor, (iii) any breach by the Consultant or Consultant’s assistants, employees or agents of any of the covenants contained in this Agreement, (iv) any failure of Consultant to perform the Services in accordance with all applicable laws, rules and regulations, or (v) any violation or claimed violation of a third party’s rights resulting in whole or in part from the Company’s use of the work product of Consultant under this Agreement.

9. Equitable Relief; Waiver of Jury Trial; Voluntary Agreement.
A. Availability of Injunctive Relief.  Each of the parties hereto acknowledges and agrees that the other parties hereto would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the parties agrees that the other parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity.
B. Waiver of Jury Trial.  In consideration of my engagement by the Company pursuant hereto, and my receipt of the compensation and other benefits paid to me by the Company, at present and in the future, Consultant agrees to waive any right to trial by jury with regard to any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from my engagement by the Company or the termination of my engagement by the Company, including any breach of this agreement, and any statutory claims under state or federal law.
C. Voluntary Nature of Agreement.  Consultant acknowledges and agrees that Consultant is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else.  Consultant further acknowledges and agrees that Consultant has carefully read this Agreement and has asked any questions needed to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Consultant is waiving its right to a jury trial.  Finally, Consultant agrees that Consultant has been provided an opportunity to seek the advice of an attorney of its choice before signing this Agreement.
10. Miscellaneous.
A. Governing Law.  This Agreement will be governed by the laws of the State of Pennsylvania excluding the choice of law principles that would require the application of the laws of a jurisdiction other than the State of Pennsylvania.  I hereby expressly consent to the personal jurisdiction of the state and federal courts located in New York for any lawsuit filed there against me by the Corporation arising from or relating to this Agreement.
B. Assignability.  Except as otherwise provided in this Agreement, Consultant may not sell, assign or delegate any rights or obligations under this Agreement.
C. Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior written and oral agreements between the parties regarding the subject matter of this Agreement.
D. Headings.  Headings are used in this Agreement for reference only and shall not be considered when interpreting this Agreement.
E. Notices.  Any notice or other communication required or permitted by this Agreement to be given to a party shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by U.S. registered or certified mail (return receipt requested), or sent via facsimile (with receipt of confirmation of complete transmission) to the party at the party’s address or facsimile number written below or at such other address or facsimile number as the party may have previously specified by like notice.  If by mail, delivery shall be deemed effective 3 business days after mailing in accordance with this Section 11(E).

                
If to the Company, to:

FLORA GROWTH CORP.
65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5
Attn: Damian Lopez, CEO
Damian.Lopez@floragrowth.ca

If to Consultant, to the address for notice on the signature page to this Agreement or, if no such address is provided, to the last address of Consultant provided by Consultant to the Company.
F. Attorneys’ Fees.  In any court action at law or equity that is brought by one of the parties to this Agreement to enforce or interpret the provisions of this Agreement, the prevailing party will be entitled to reasonable attorneys’ fees, in addition to any other relief to which that party may be entitled.
G. Severability.  If any provision of this Agreement is found to be illegal or unenforceable, the other provisions shall remain effective and enforceable to the greatest extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement effective as of the date first written above.
DALV Consulting, LLC
FLORA GROWTH CORP.
 
By:(signed) “Vlad Uchenik”
 
By: (signed) “Damian Lopez” 
Name: Vlad Uchenik
Name:   Damian Lopez
Title: President
Title:  CEO
Address for Notice:
252 Bradley Court, Holland, PA 18966
Address for Notice:
FLORA GROWTH CORP.
65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5
Attn: Damian Lopez, CEO

EXHIBIT A
Services and Compensation
1. Contact.  Consultant’s principal contact at the Company:
Name:        Damian Lopez
Title:          CEO
2. Services.  The Services shall include, but shall not be limited to, the following:

Assist the Company with its existing Reg A+ offering by working with all parties (third party vendors) involved in the transaction. Provide advice and recommendation on the process, structure, compliance and operations of the offering. Coordinate with the broker/dealer and Company’s counsel as needed.

Mr. Uchenik, on behalf of DALV Consulting, LLC will work with the Company’s CEO. The Agreement obligates Mr. Uchenik to render all services required of Consultant pursuant to the Agreement, and that Mr. Uchenik may not delegate the obligations to perform such services to another person.

3.           Compensation.
Consultant will be entitled to receive the following fees that will be paid by Company as follows:
$30,000 due at time of signing the agreement
Accepted and agreed effective as of September 6, 2019
DALV Consulting, LLC
FLORA GROWTH CORP.
 
By:(signed) “Vlad Uchenik
 
By: (signed) “Damian Lopez” 
Name: Vlad Uchenik
Name: Damian Lopez
Title: President
Title:  CEO

SHARED COSTS SERVICES AGREEMENT

This Agreement is made as of March 14, 2019

 
BETWEEN:
FLORA  GROWTH  CORP.,  a  body  corporate  duly incorporated under the laws of Ontario, and having an office at 65 Queen Street West, Suite 815, P.O. Box 75, Toronto, Ontario, M5H 2M5
 
(hereinafter referred to as the “Issuer”)
 
 
AND:
2227929  ONTARIO  INC.,  a  body  corporate  duly incorporated under the laws of Ontario and having an office at 65 Queen Street West, Suite 815, Toronto, ON M5H 2M5
 
(hereinafter the “Company”)
 
   
(collectively, the “Parties” and each of them, a “Party”)
 
RECITALS:

WHEREAS the Issuer and the Company desire that the Company provide the Issuer  with certain general and administrative, promotional, corporate development and consultancy services (collectively, the “Shared Services”);

AND WHEREAS the Company has agreed to undertake to render such services to the Issuer;

NOW THEREFORE, THIS AGREEMENT witnesses that for and in consideration of the premises and mutual covenants and conditions hereinafter contained, the parties hereto agree as follows:

ARTICLE 1 – INTERPRETATION

1.1
Definitions

Whenever used in this Agreement, the following words and terms shall have the meanings set out below:

Agreement” means this Services Agreement and all instruments supplementing or amending  or confirming this Agreement and references to “Article” or “Section” mean and refer to the specified Article or Section of this Agreement;

Shared Services” shall have the meanings ascribed thereto in the recitals, and shall included but not be limited to, general and administrative expenses incurred with respect to the office premises at 65 Queen Street West, promotional services and consultancy services;

Parties” and “Party” shall have the meanings ascribed thereto in the preamble;


person” means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated  association, trust, trustee, executor, administrator or other legal personal representative; and

1.2
Certain Rules of Interpretation

In this Agreement:

(a)
Time – time is of the essence in the performance of the Parties' respective obligations;

(b)
Currency – unless otherwise specified, all references to money amounts are to Canadian currency;

(c)
Headings – descriptive headings of Articles and Sections are inserted solely for convenience of reference only and are not intended as complete or accurate descriptions of the content of such Articles or Sections;

(d)
Singular, etc. – use of words in the singular or plural, or with a particular gender, shall not limit the scope or exclude the application of any provision of this Agreement to such person or persons or circumstances as the context otherwise permits;

(e)
Inclusion – where the words “including” or “includes” appear in this Agreement, they mean “including (or includes) without limitation”;

(f)
Any reference to a law is a reference to such law as in force from time to time, including (i) modifications thereto, (ii) any regulation, decree, order or ordinance enacted thereunder and (iii) any law that may be passed which has the effect of supplementing, re-enacting or superseding the law to which it is referred; and

(g)
Any reference to a numbered or lettered section in this Agreement is a reference to the section bearing that number or letter in this Agreement and a reference to “this” section means the section in which such reference appears.

1.3
Severability

If any provision of this Agreement is determined to be void or unenforceable, in whole or in part, it shall be deemed not to affect or impair the validity of any other provision of this Agreement.

1.4
Entire Agreement

Upon the Parties’ execution of this Agreement, this Agreement shall constitute the entire agreement between the Parties pertaining to the subject matter of this Agreement and shall supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. There are no warranties, representations or other agreements between the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the Party to be bound thereby.


1.5
Applicable Law

This Agreement shall be governed in all respects by the laws in force in the Province of Ontario, inter alia having regards to its formation, existence, validity, effect, interpretation, execution, violation and termination.

ARTICLE 2 – SERVICES TO BE PROVIDED

2.1
Services

The Company will provide to Issuer during the Term (as defined below) the Shared Services, as applicable. Issuer acknowledges that the Shared Services are being provided concurrently to other companies which may or may not share the same corporate head and registered office as Issuer, as set forth in Schedule “A” hereto, which list may be amended by the Company unilaterally from time to time (the “Group Companies”).

The Company will provide to the Issuer by December 1 of each year, a budget for the following year. In addition, the Company will provide to the Issuer at the commencement of each quarter, a variance report reconciling the budget to actual expenditures of the Company for the preceding quarter.

2.2
Excluded Services

The following is a non-inclusive listing of services and costs that are not included in the services provided by the Company: legal, audit, insurance, filing fees, regulatory fees, travel, interest and bank charges, costs related to raising capital, costs related to business and property acquisitions. However, if the Company pays for these costs on behalf of the Issuer, these costs will be invoiced by the Company and Issuer will reimburse the Company for these costs.

2.3
Fees

The fees (the “Fees”) for the Shared Services hereunder shall be at the rate of CAD$15,000 per month plus applicable harmonized sales tax, payable in equal monthly amounts in advance on the first business day of each month. It is hereby acknowledged and agreed by Issuer that the Fees represent a portion of the expenses incurred by the Company in the provision of services to the Forbes & Manhattan Group of Companies.

The Issuer acknowledges that from time to time, due to the nature of the business operations and the variable nature of the provision of Shared Services, additional fees may arise from time to time (“Additional Expenses”). Any Additional Expense for which proper documentation is provided to the Issuer shall be payable by Issuer as billed.

The Issuer further acknowledges that the Fees are negotiated with each of the Group Companies on the basis of certain qualitative criteria determined in the Company’s sole discretion with a view to the Group Companies as a collective and individually. Accordingly,  from time to time, Fees payable for the Company’s services may be amended upon mutual agreement between the parties.


ARTICLE 3 - TRADING RESTRICTIONS

The Company expressly acknowledges that the common shares of the Issuer are publicly traded on the TSX Venture Exchange and hereby agrees not to trade in the common shares of the Issuer while in possession of material undisclosed information.

ARTICLE 4 - NOTICES

Any notice, statement, order, decision or other communication to be delivered or given by either Party must, unless otherwise permitted, be in writing and shall be delivered, mailed or faxed or delivered by electronic transmission to the address for service of notices for such Party.

FLORA GROWTH CORP.
65 Queen Street West, Suite 815 Toronto, Ontario, M5H 2M5
Fax (416) 861-8165

Attention: Damian Lopez, Director

2227929 Ontario Inc.
65 Queen Street West, Suite 815 Toronto, Ontario, M5H 2M5
Fax (416) 861-8165

Attention: Fred Leigh, Director

Either Party may give notice to the other Party in the manner herein provided of a change of address or designation of individual. Any notice, statement, order, decision or communication personally delivered or delivered through electronic transmission shall be deemed given when so delivered; any notice, statement, order, decision or communication faxed shall be deemed given on the next Business Day after being faxed; and any notice, statement, order, decision or communication mailed shall be deemed to have been given on the third Business Day after being mailed by registered mail, provided if there is any disruption in postal service, they shall be deemed to have been given and received on the day of actual delivery.

ARTICLE 5 – TERM AND TERMINATION

5.1
Term of Agreement

This Agreement is for an initial term commencing on the date hereof and expiring after three (3) years, and shall be automatically renewed from time to time thereafter for additional terms of one year unless otherwise terminated pursuant to Section 5.2 hereof.


5.2
Termination of Agreement

(a) 
This Agreement may be terminated by either Party giving at least 90 days’ prior written notice (or such shorter period as the Parties may mutually agree upon) to the other Party of termination.

(b) 
This Agreement shall terminate immediately in the event of the commission by the Company of any fraudulent act.

(c) 
This Agreement shall terminate immediately where a winding-up, liquidation, dissolution, bankruptcy, sale of substantially all assets, sale of business or insolvency proceeding have been commenced or are being contemplated by the Company.

(d) 
Upon termination of this Agreement, stock options granted by the Issuer to Executive Officers, Directors and other personnel provided by the Company will vest and expire in accordance with the Issuer’s stock option plan.

5.3
Conduct After Notice of Termination

From the date of notice of termination of this Agreement provided under Section 5.2(a) above:

(a) 
the Company shall not enter into any new arrangements or agreements on behalf of the Issuer (unless already legally committed to do so) without the Issuer’s prior consent; and

(b) 
notwithstanding any termination of this Agreement, the Issuer shall continue to  be bound by any agreements contracted for on its behalf by the Company prior to termination.

5.4
Conduct After Termination

From the effective date of termination of this Agreement:

(a) 
agreements or obligations which have been executed or incurred by the  Company in connection with or related to Services provided to the Issuer shall be assigned over to the Issuer and the Issuer shall indemnify Company in connection with the due performance of such agreements;

(b) 
The Issuer shall, within 10 days of the effective date of the termination of this Agreement, pay to the Company a termination payment equal to the anticipated Fees of the Issuer for the greater of (i) the six months following termination; or (ii) the remaining calendar year;

(c) 
The Issuer shall cease to use the Company’s premises, facilities, equipment, phone numbers and any other items that are the property of Company and shall make arrangements for the orderly transition of the Services by advice letter to the Company;


(d) 
The Company shall be the sole and exclusive owner of the business contacts  and investor database maintained by the Company; and

(e) 
The Company shall immediately furnish to the Issuer at the Issuer’s cost, all books, records, electronic data and other information pertaining to the Issuer and, upon the effective date of the termination of this Agreement, Company shall forthwith transfer all books, records, electronic data and other information pertaining to the Issuer together with all other materials pertaining to the Issuer, in its possession, at the Issuer’s cost, to any successor thereof. For a period of six years following the effective date of the termination of this Agreement, Company shall provide the Issuer and any successor manager of the Issuer with any information from its records that the Issuer may reasonably require and shall be reimbursed for its reasonable costs and expenses thereof.

ARTICLE 6 – GENERAL PROVISIONS

6.1
Records and Reporting

The Company shall maintain, at all times, copies of all records related to the Services and the fees invoiced to the Issuer for such Services (collectively, “Documentation”).  The Company  will retain such Documentation for not less than seven years from the date of its creation. The Company shall prepare such other reports as may be reasonably required by the Issuer from time to time.

6.2
Audit and Inspection Right

(a) 
Upon reasonable notice from the Issuer, the Company shall provide to the Issuer and its internal and external auditors, inspectors, advisors, and such other representatives as such parties may designate from time to time, access to the Company’s locations during normal business hours for the purposes of performing audits and inspections relating to the Services, including access to:

(i)
the parts of a facility at or from which the Company is providing the Services;

(ii)
the Company’s personnel who are providing the Services;

(iii)
all Documentation relating to the Services;

(iv)
all physical assets that belong to or are charged to the Issuer;

to examine the Company’s performance of the Services under this Agreement. The Company shall provide full co-operation and assistance to any such entity exercising the right of audit and inspection hereunder and to its internal and external auditors, inspectors and designated representatives as may reasonably be required.


(b) 
the Issuer shall be responsible for any additional costs or expenses reasonably incurred by the Company in connection with any audits or inspections conducted as provided for hereunder.

6.3
Philosophy and Policies

During the term of this Agreement, in accordance with Article 5 hereto, the Company agrees to be bound by the Forbes & Manhattan Group of Companies Statement of Philosophy and Policies set out in Schedule “B” attached hereto.

6.4
Survival

It is acknowledged and agreed that upon any expiry or termination of this Agreement (as extended, if applicable) Section 1.5 and Articles 3, 4 and 5 shall survive any such expiry or termination as the case may be.

[The remainder of this page intentionally left blank]


This Agreement shall enure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns.

IN WITNESS OF WHICH the Parties have duly executed this Agreement as of the date first written above.


2227929 ONTARIO INC.


Per: Fred Leigh 
         Authorized Signatory


FLORA GROWTH CORP.


Per: Deborah Battiston 
         Authorized Signatory


SCHEDULE “A”
List of Group Companies:

Aberdeen International Inc.
African Gold Group, Inc.
AnalytixInsight Inc.
ARHT Media Inc.
Belo Sun Mining Corp.
Black Iron Inc.
Brazil Potash Corp.
Copper One Inc.
EarthRenew Inc.
Emerita Gold Corp.
Euro Sun Mining Inc.
Fura Gems Inc.
Irati Energy Ltd.
Jourdan Resources Inc.
Q-Gold Resources Ltd.
QMX Gold Corporation
Routemaster Capital Inc.
Savanna Capital Corp.
Sulliden Mining Capital Inc.
Magnolia Colombia Ltd.
Trigon Metals Inc.
Yukoterre Resources Inc.


SCHEDULE “B”

STATEMENT OF PHILIOSOPHY AND POLICIES
RELATING TO THE FORBES & MANHATTAN GROUP OF COMPANIES

The following records the philosophy and policies (the “Philosophy and Policies”) that govern  the Forbes & Manhattan Group of Companies. As a party to a consulting agreement with Forbes & Manhattan, Inc. (“F&M”), African Gold Group Inc. (the “Corporation”) has expressly acknowledged that it is a member of the Forbes & Manhattan Group of Companies and hereby agrees to be bound by these policies.

ROLE OF FORBES & MANHATTAN

F&M provides management of the Corporation with an advisory role relating to capital raising and strategic acquisitions as well as contacts in the areas of management team building, resources sector, mergers, acquisitions, restructuring and financings. F&M also assists with the recruitment and retention of key members of executive management and members of the board of directors and introducing management to various institutional investors and  investment banks, all of which provide significant benefits to the Corporation.  The services provided by  F&M are advisory in nature stemming from its specific expertise.  The compensation received  by F&M reflects the value it adds to the Corporation through its advice and network of industry contacts

In addition to the services described above, F&M provides services to the Corporation through a number of individuals, including administrative, financial, technical and information technology services.

The services provided by F&M to the Corporation include various administrative, strategic and technical services that are provided through its team of geologists, mining engineers and financial professionals (including the F&M Consultants (as defined below)). The nature of services provided includes assistance with strategic planning and development of business plans, assessment of strategic transactions, including business, technical and geological, legal and financial due diligence, and fostering public and government relationships. In addition, F&M provides assistance in the development of capital markets strategies and makes the services of Stan Bharti available to the Corporation.

F&M is entitled to compensation for the provision of such services equal to the monthly base fee set out in the consulting agreement between F&M and the Corporation. F&M is also entitled to receive cash bonus payments from the Corporation and participate in any equity compensation plan of the Corporation. Any cash bonuses or equity compensation received by F&M will be accounted for as compensation received by Mr. Bharti in the Corporation’s public disclosure; however, there is no agreement between the Corporation and Mr. Bharti personally.

SHARED COST COMPANY

The Corporation acknowledges that it receives substantial benefits, including cost savings, through the sharing of certain services and the procurement of products on a volume basis as a result of the Corporation being a member of the F&M Group of Companies. These benefits include reduced rates with external good and service providers like assay labs, commercial printers, hotel operators and registrars and transfer agents. There are also distinct efficiencies


and cost savings that arise through the shared use of technical, legal, accounting and administrative professionals that are internal to the F&M Group of Companies.

An additional benefit that the Corporation enjoys as a result of its membership in the F&M  Group of Companies is the agreement between the Corporation and 2227929 Ontario Inc. (the “Shared Service Company”). The Shared Services Company provides efficiencies through the shared office lease, providing certain professional and administrative services and, importantly, promotional services and event planning. The Corporation acknowledges that its agreement  with the Shared Service Company is in addition to its agreement with F&M and any agreements that it has with F&M Consultants (as defined below) or other service providers.

TRANSITION OUT OF F&M GROUP OF COMPANIES

In the past, companies have left the F&M Group of Companies when they have grown self sufficient, too large or for other reasons. As a current member of the Group, the Corporation acknowledges that both F&M and the Shared Service Company have dedicated resources (financial, human and otherwise) and have entered into contractual obligations and arrangements from which the Corporation benefits. Accordingly, it would significantly prejudice and be harmful to F&M, the Shared Service Company and the other companies within the F&M Group of Companies for the Corporation to leave the F&M Group of Companies. Consequently, the Corporation agrees that, in the event the Corporation decides to leave the F&M Group of Companies, it shall:

Honour the termination provisions of the agreement between the Corporation and F&M and agreement between the Corporation and the Shared Service Company, including the payment of a termination fee to the Shared Service Company equal to the anticipated contribution of the Corporation to the Shared Service Company for the greater of (i) the six months following termination; or (ii) the remaining calendar year;

Assume the agreements or obligations that have been executed or incurred by F&M or the Shared Service Company in connection with or related to those services that F&M or Shared Service Company, as the case may be, determines, in its sole discretion, have been procured for the principal benefit of the Corporation and the Corporation shall indemnify F&M or the Shared Service Company, as the case may be, in connection with the due performance of such agreements;

Shall cease to use F&M’s name or premises, facilities, equipment, phone numbers and any other items that are the property of F&M or the Shared Service Company; and

F&M shall always be the sole and exclusive owner of (i) the business contacts and investor database maintained by F&M; (ii) potential corporate transactions, acquisition and strategic opportunities and the like developed by, or otherwise presented initially to, F&M, regardless of whether or not F&M presented such opportunity or related information to the Corporation; and (iii) any other proprietary or confidential information  of F&M, whether or not explicitly identified as such to the Corporation. The Corporation shall promptly return all information in (i), (ii) and (iii) to F&M following the termination


ENGAGEMENT OF CONSULTANTS ON BEHALF OF GROUP COMPANIES

F&M provides the Corporation with a key service by providing a pool of professionals (technical, operational, legal, financial markets, accounting, administrative, information technology, etc) (each, a “F&M Consultant”) from which the Corporation can engage a professional from time to time. A F&M Consultant may be seconded to, or otherwise engaged by, the Corporation in different capacities. Regardless of the tenure, office or responsibilities that the F&M Consultant may provide, or for which he or she may serve, the Corporation, the Corporation agrees that the F&M Consultant has been provided to the Corporation by F&M and F&M retains the right to use and place such individual with other companies and projects in its sole discretion.

Each of the companies within the F&M Group of Companies acknowledges that F&M Consultants provide consulting services to related parties and/or companies within the F&M Group of Companies and, subject to the fiduciary duties of individual consultants, waives any objection or conflict arising from such roles.

Cessation of Engagement of F&M Consultant by the Corporation

As part of its agreement with any F&M Consultant, the Corporation may agree to make certain payments to the Consultant upon the termination of such agreement.

However, the Corporation acknowledges that it may not be appropriate for a F&M Consultant to receive a termination payment from the Corporation (other than in connection with a change of control of the Corporation) if it is anticipated that such F&M Consultant will continue to be engaged as a F&M Consultant or by one or more other companies within the F&M Group of Companies. F&M will use commercially reasonable efforts to have each F&M Consultant acknowledge and agree to such policy in the relevant engagement agreement.

GENERAL CORPORATE POLICIES

Confidentiality

The Corporation shall use the Confidential Information of F&M only for the purposes contemplated in the agreement between the Corporation and F&M and in accordance with this Philosophy and Policies. The Corporation shall use commercially reasonable efforts to ensure that such Confidential Information is not used, disclosed, published, released, transferred or otherwise made available in any form to, for the use or benefit of, any person, without the prior written approval of F&M, which may be unreasonably withheld. These confidentiality obligations shall not restrict any disclosure by the Corporation that:

is required by any applicable law or by order of any court of competent jurisdiction or governmental authority;
relates to information that is independently developed by the Corporation;
relates to information that is or becomes publicly available (other than through unauthorized disclosure by the Corporation);
or relates to information that is received from a third party free of any obligation of confidentiality.

The Corporation recognizes that its unauthorized disclosure of Confidential Information of F&M may give rise to irreparable injury to F&M and acknowledges that remedies other than injunctive relief may not be adequate.  Accordingly, F&M has the


right to seek equitable and injunctive relief on an interim and interlocutory basis to prevent the unauthorized possession, use, or disclosure or knowledge of any Confidential Information, as well as to such damages or other relief as is occasioned by such unauthorized possession, use, disclosure or knowledge.

Non-Disparagement

The Corporation agrees that, during the period in which it is a member of the F&M Group of Companies and for a three year period thereafter following termination of that membership, neither it nor any of its officers, directors, employees, consultants, affiliates or associates will, and it will cause each of its officers, directors, employees, consultants, affiliates and associates not to, directly or indirectly, in any capacity or manner, make, express, transmit, speak, write, verbalize or otherwise communicate in any way (or cause, further, assist, solicit, encourage, support or participate in any of the foregoing), any remark, comment, message, information, declaration, communication or other statement of any kind, whether oral, in writing,  electronically transferred or otherwise, that might reasonably be construed to be derogatory or critical of, or negative toward, F&M, any other company that is a member of the F&M Group of Companies or any of the directors, officers, affiliates, subsidiaries, employees, consultants or representatives thereof.

Subject to all laws including those relating to whistle-blowing, appropriate reporting and disclosure, the Corporation acknowledges and agrees that any such communication will cause irreparable damage to F&M and the other companies that are members of the F&M Group of Companies.

Conflicts of Interest

Most F&M Consultants serve or may agree to serve as directors or officers of a number of companies and, to the extent that such other companies may participate in ventures in which  the Corporation may participate, the F&M Consultants may have a conflict of interest vis-à-vis the Corporation in negotiating and concluding terms respecting such participation.

F&M shall not be obligated to provide any information or advice to the Corporation respecting resource property prospects and opportunities that come to the attention of F&M unless such prospects and opportunities can be clearly demonstrated to have been received or obtained primarily as a result of the provision of property related services by F&M to the Corporation pursuant to the agreement between the two. The Corporation acknowledges that F&M is expected to be regularly exposed to resource property opportunities in the ordinary course and may receive resource property prospects and opportunities as a consequence of the services that it provides and otherwise. The Corporation also acknowledges that F&M may receive unsolicited proposals and opportunities from sources wholly unrelated to the Corporation and that those opportunities are as well acknowledged by the Corporation to be the sole property of F&M and that it may retain same for its own benefit or elect to transfer them to any other company or third party in its sole discretion.

Health Insurance Coverage

The Corporation acknowledges that the health insurance policy subscribed for by F&M does not cover consultants and employees of the Corporation. The Corporation must obtain its  own health insurance coverage if it wishes to provide such coverage to its employees and consultants.


Prohibitions on Insider Trading and Tipping

Both F&M and the Corporation take seriously their respective responsibilities to prevent insider trading and tipping. Given the large number of reporting issuers among the F&M Group of Companies, F&M has implemented, and the Corporation agrees to abide by, the following policies:

The Corporation will adopt a policy regarding the public disclosure of material information, restrictions regarding the trading of securities of both the Corporation and all other members of the F&M Group of Companies, and a prohibition on tipping.

Each Sunday night, the Chief Executive Officer of the Corporation will report to the Senior Lawyer in the F&M Group of Companies as to whether or not there is any undisclosed material information relating to the Corporation.

Each employee or consultant of the Corporation must receive prior written approval from the Senior Lawyer in the F&M Group of Companies regarding any proposed trade in the securities of any company in the F&M Group of Companies, including the Corporation. Approval will be granted unless there is undisclosed material information relating to the respective company. An email from the Senior Lawyer will be considered written approval for this purpose.

Anti-Corruption Guidelines

Both F&M and the Corporation are committed to the prohibition of any acts of corruption, fraudulent practices, co-ercive or collusive practices in the operation of its business in Canada and in foreign jurisdictions.

In particular, the Corporation expressly acknowledges and agrees that it will conduct its  business affairs in compliance with the Corruption of Foreign Public Officials Act (Canada) and that it is a federal offence to bribe a foreign public official, launder property and proceeds and possess property and proceeds which resulted from acts of corruption, bribery and laundering. In addition, it is expressly agreed and acknowledged that it is an offence to aid and abet the committing of any of such offence, have the intent to commit such offence or counsel others to commit the offences and that such offences may be penalized by: (i) a maximum term of five years imprisonment for individuals; and (ii) monetary fines for corporations which have been found guilty of such offences.


Internet Usage

The Corporation acknowledges that the telephones, computers, servers and internet connectivity used by the Corporation and its employees and consultants may be owned by F&M. Such machines must be used in a manner that is respectful to everyone at F&M and cannot be used in any manner that may be adverse to the interests of F&M and/or the Corporation. F&M may revoke the licence of any user of its telephones, computers, servers  or internet connectivity at any time upon the breach or termination of the agreement between the Corporation and F&M or upon knowledge that such use has been adverse to the interests of F&M. Such machines cannot be used to commit illegal, unethical and/or inappropriate  acts, including viewing and/or transmitting pornography or material that may be considered sexually charged or offensive or constitute religious, racial or gender discrimination.

Directors and Officers Liability Insurance

During its membership in the F&M Group of Companies, the Corporation shall at all times maintain in good standing directors and officers liability insurance with coverage that is consistent with best corporate practices.

Expense Reimbursement

With all appropriate prior approval(s), expenses are to be incurred in respect of, and for the account of, either F&M or the Corporation. Without prior written approval, expenses are not  to be incurred for the account of the Shared Cost Company.

GENERAL PROVISIONS

The Corporation agrees to, upon request of F&M, execute and deliver or cause to be executed and delivered all such documents, deeds and other instruments of further assurance and do or cause to be done all such acts and things as may be reasonably necessary or advisable to implement and give full effect to the provisions of this Philosophy and Policies.

The Corporation cannot assign its rights and obligations under the Philosophy and Policies without the prior written consent of F&M.

This Philosophy and Policies shall enure to the benefit of and be binding upon the  successors and permitted assigns of the Corporation and F&M.

F&M may amend this Philosophy and Policies from time to time in its sole discretion. The amended Philosophy and Policies will not be binding upon the Corporation until a copy of such amended Philosophy and Policies has been countersigned by the Chief Executive Officer of the Corporation.

Any provision of this Philosophy and Policies that is prohibited or unenforceable in any jurisdiction will, as to that jurisdiction, be ineffective to the extent of such prohibition or unenforceability and will be severed from the balance of this Philosophy and Policies, all without affecting the remaining provisions of this Philosophy and Policies or affecting the validity or enforceability of such provision in any other jurisdiction.


As of August 5, 2014

PROMISSORY LEASE WITH OPTION TO SALE AND PURCHASE AGREEMENT IN RELATION TO BOCAS DE PALAGUA AND TIERRA PROMETIDA PROPERTIES ACCORDING TO CONVEYANCE CERTIFICATE NO. 088-11836
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Among the undersigned, namely:


(i) WALDSHUT C.V., legally represented in this act by Margarita María Méndez Caicedo, of legal age, holder of Colombian Identification No. 1.130.667.987, who serves in this act in her capacity as special attorney-in-fact, as evidenced by the power of attorney registered at the 5th (fifth) Notary of Cali, Deed No. 404 of the 17th of February of 2017 and whose power of attorney is valid until the 31st of December of 2018, acting as Exhibit No. 1 (the Landlord with Option to Sale”), and, on the other hand,

(ii)        COSECHEMOS YA S.A.S., identified with NIT Number con 900.969.918-1, legally represented in this act by Oscar Mauricio Franco Ulloa, of legal age, holder of Colombian Identification No. 79.596.227, who serves in this act in his capacity as legal representative, as stated in the Certificate of Incorporation and Legal Representation issued by the Chamber of Commerce Bucaramanga, acting as Exhibit No. 2 (the “Tenant with Option to Purchase”).

The Landlord with Option to Sale and the Tenant with Option to Purchase shall be individually referred as Party and collectively as the Parties, have agreed to celebrate into a promissory lease with option to commercial sale and purchase (hereinafter the agreement) that shall be ruled in accordance with the applicable legal rules and, in particular, y the following clauses and prior the following:

CONSIDERATIONS:

1.
The parties celebrate into this agreement on 706 hectares, 8895 square meters (the Area”) of the property located in the village Palagua, rural area of the municipality of Puerto Boyacá, department of Boyacá, identified with the real estate registration No. 088-611836 of the County Recorder’s Office of Puerto Boyacá and the cadastral certificate No. 155720001000000040183000000000, land property A Brisas de Palagua (the “Property”).

2.
The Tenant with Option to Purchase, shall destine the Property to labors related to cannabis cultivation with medicinal and scientific purposes, other activities of production and transformation associated to these and activities included within its business purpose.

That the Parties have been carrying out negotiations and in order to reflect the agreements, have decided to leave in the Agreement each one of the arrangements thus:


PROMISSORY LEASE WITH OPTION TO SALE AND PURCHASE AGREEMENT IN RELATION TO BOCAS DE PALAGUA AND TIERRA PROMETIDA PROPERTIES ACCORDING TO CONVEYANCE CERTIFICATE NO. 088-11836
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PROVISIONS


First Provision - Purpose. Under this Agreement, the Landlord with Option to Sell promises to deliver the tenancy, as a lease with option to sell, to the Tenant with Option to Purchase, who in turn promises to receive the same title for his use and enjoyment, in relation to a land of 706 hectares, 8895 square meters (the “Area”), which is located within the property in the village Palagua, rural area of the municipality of Puerto Boyacá, Department of Boyacá, identified with the real estate registration No. 088-611836 of the County Recorder´s Office of Puerto Boyacá and the cadastral certificate No. 155720001000000040183000000000, land property A Brisas de Palagua (the “Property”). The property is described and determined according to the sides taken from public Deed No, 970 of the 30th of September of 2005, granted by the Notaria Unica of Puerto Boyaca (the “Property”), which are in Annex No. 3 of the present Agreement.

Paragraph. The Landlord with Option to Sale, expressly states that lease and sell and purchase option of the Area includes the entitlement to the use and enjoyment of improvements, easements, uses and annexes found on the Property.

Second Provision - Destination. The Tenant with Option to Purchase, is obliged to destine the Area for labors related to cannabis cultivation with medicinal and scientific purposes, other activities of production and transformation associated to these and activities included within its business purpose, in accordance with the Certificate of Incorporation and Legal Representation issued by the Chamber of Commerce Bucaramanga and in specific, nonetheless not being limited to: the development of agricultural and/or agro-industrial, medicinal and scientific activities, especially but nonetheless not being limited to the manufacture of cannabis derivatives for national use and scientific research, manufacture for exporting, cultivation of cannabis for medicinal and scientific purposes, of seeds for planting and the cultivation of cannabis plants, for medicinal, scientific and industrial uses and research, including the storage of inputs, derivate products, by-products, raw materials and other forms of licenses that are allowed to the Tenant in accordance to with the current legislations, including Law 1787 of 2016, Decree 613 of 2017, Decree 780 of 2016 and Resolution 2891 and Resolution 2892 de  of 2017 issued by the Ministry of Health and Social Protection, Resolution 3168 of 2015 issued by the Colombian Agricultural Institute, and other regulations currently in force issued by the competent authorities and those issued after the signing of the present document.


PROMISSORY LEASE WITH OPTION TO SALE AND PURCHASE AGREEMENT IN RELATION TO BOCAS DE PALAGUA AND TIERRA PROMETIDA PROPERTIES ACCORDING TO CONVEYANCE CERTIFICATE NO. 088-11836
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Paragraph. By virtue of this Agreement, the Landlord with Option to Sell, as owner of the Property, expressly authorizes the Tenant with Option to Purchase, to make use of the Area for the implementation, development and cultivation of cannabis plants for medicinal and scientific uses as well as other agricultural and/or agro industrial purposes directly or indirectly related to said activities, in accordance with the provision of the licenses granted by the competent authorities to the Tenant, including the production of seeds authorized or registered within the Colombian Agricultural Institute.

Third Provision - Price. The value of the Area´s monthly rental fee (the “Fee”) shall be:

1.
Ninety-five thousand eight hundred-nine Colombia pesos (COP $95.879), monthly for each hectare, which shall be in force from the beginning of the use of each hectare, in accordance with the delivery certificates signed by the parties.

2.
The Tenant with Option to Purchase shall request from the Landlord the delivery of the total or partial Area corresponding with at least ten working days prior to its use, and it is obliged not to use additional areas without the corresponding delivery certificates being executed and subscribed.

The Tenant with Option to Purchase is obliged top at the Fee within ten (10) business days following the date of receipt of the invoice sent, as referred to in the first paragraph of this clause.

First Paragraph. Invoice Radication. The Landlord with Option to Sell shall file a monthly electronic invoice for the fee’s collection at the following e-mail address:  director@cosechemosya.co

Second Paragraph. Form of Payment. The Tenant shall pay the Fee in favor of Agrícola y Ganadera Palagua Ltda, Nit No. 830.145.497 in the current account No. 12250407792 of Bancolombia. The bank account change in order to make effective the fee consignation shall be informed by means of notification.

Third Paragraph. Fee adjustment. Upon expiration of the first year of the Agreement, the Fee shall be increased automatically without the need for any requirement between the Parties, in a proportion equal to the consumer Price index (CPI) increase, this being certified by the DANE for the 12 months immediately prior to the date in which readjustments are to be made.


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Fourth Paragraph. Grace period. The Landlord with Option to Sell, shall grant in favor of the Tenant with Option to Purchase, a grace period to be agreed upon by the Parties when they deem as convenient, within the mentioned grace period, no fee shall be caused, nonetheless, the Tenant with Option to Purchase shall be held responsible for the payment of the corresponding public services (the “Grace Period”).

Fourth Provision - Duration of the Agreement. The present Agreement shall have duration of nine months as of its subscription, on the total and / or partial areas delivered during said period.

The promissory lease with option to sale and purchase agreement shall have an initial term of five (5) years, counted from the date of receipt of the property or the Total or Partial Area, which includes the Grace Period.

Fifth Provision - Automatic carryover. The present promissory lease agreement shall not be carried over and shall be terminated at the end of the term, over the Total or Partial Areas not delivered by means of an act.

Without prejudice to the renewal right granted by law, upon expiration of the initial term or carryovers of the promissory lease with option to sale and purchase agreement, the Agreement shall me automatically extended for a term of five (5) years, unless either of the parties sends to the other a written notice of intent to terminate the Agreement, three (3) months prior to the termination date of the Agreement or any of its carryovers.

Sixth Provision – Delivery. The Landlord with Option to Sell, shall deliver to the Tenant with Option to Purchase when so requested at least ten (10) business days prior and when the areas are available. The Landlord with Option to Sell shall deliver the Area, with all its annexes, improvements, uses and customs, without prejudice to the grace period that may have been agreed upon by the parties provided in the fourth Paragraph of the Third Provision.

Seventh Provision - Obligations of the Landlord. The following are the stipulated obligations of the Landlord, without prejudice to those imposed by law and on the areas that are delivered by the means of an act:

(a)
To allow the peaceful use and enjoyment of the total or partial Area delivered.
(b)
To release the Tenant from any disturbance in the normal and full enjoyment of the total or partial Area delivered.
(c)
To receive the payment of the fee on the total or partial Area delivered.
(d)
To file the accounts receivable or invoice of the lease fee.


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(e)
To allow the Tenant, with prior express written authorization, to make improvements and adjustments in the Area for its adaptation and use, in accordance with the Agreement Provisions. Being understood that the same will access the property and in event of termination and restitution, shall not be recognized to the Tenant.
(f)
To carry out all necessary acts to prevent the imposition of any judicial or extrajudicial lien or precautionary measure that affects the free holding of the Area and/or the Property that do not correspond to the use or destination of the Area delivered by the Tenant.
(g)
To receive the Area upon termination of the Agreement, as determined in the mentioned.
(h)
To notify to the Tenant prior to entering into any legal business involving areas wholly or partially delivered.
(i)
All other law provisions as well as those stipulated on this Agreement.

Eighth Provision - Obligations of the Landlord. The following are the stipulated obligations of the Tenant, without prejudice to those imposed by law:

(a)
To pay the Fee in accordance with the provisions of this Agreement.
(b)
To use and enjoy the Area in accordance with this Agreement, without changing its destination.
(c)
To watch over and care for the conservation of the property and/or Area and those things received in rent. To carry out timely and at its own expense repairs or replacements
(d)
To restitute the property and/or Areas at the termination of the Agreement, in the state in which they were delivered according to the arrangements herein agreed, to restitute the property with all services and annexes totally up to date and fully discharged of its obligations.
(e)
To comply with all requirements set forth in the regulations in force to the operation and use of the property and/or Area, including obtaining all permits and licenses required in relation to the operation and maintenance
(f)
All other law provisions as well as those stipulated on this Agreement.  .

Ninth Provision. The Tenant undertakes to go out to the Tenant’s sanitation in the events of encumbrances and redhibitory vices that affect the agreed use of the Area.


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Similarly, the Tenant declares that the Property is free of encumbrances that may affect its use and enjoyment.

Tenth Provision - Local Repairs. The Tenant shall be in charge of carrying out the local repairs in the Area in accordance to the terms of article 1985 of the Colombian Civil Code.

Eleventh Clause - Public Services. From the total or partial delivery of the area, according to the subscribed acts and up to the restitution date, the Tenant shall be obliged to pay for the public services regarding energy, telephone lines, aqueduct, and sewerage and garbage collection. If, as a consequence of not timely payment of public services, the respective companies suspend them, withdraw the meter or telephone lines, the Tenant shall charged with the late payment penalties interests, penalties and expenses that demand reconnection. The Tenant may, without any limitation, install its own telephone line(s), power transformers and water suction pumps, which may be withdrawn upon termination of the Agreement.

Paragraph. The Landlord shall cooperate as owner of the Property by means of authorizations in order to carry out the claims and formalities required for the purpose of restoring the service or adequately provided by the respective companies.

Twelfth Provision - Lease Transfer. The Tenant is NOT authorized, by signing this Agreement, to transfer its contractual position, and shall require the Landlord’s express written permission.  The transfer of the contractual position by the Landlord, or any of the rights emanating from the Agreement shall NOT require the authorization of the Tenant.

Thirteenth Provision - Sublease. In the event that the Tenant tends to sublet partially or wholly the Area to a third party, it must be prior, written and expressly authorized by the Tenant.

Fourteenth Provision - Area Restitution. For the restitution of the partial or whole delivered Area, once the Agreement is terminated or any of its extensions or carryovers, the Landlord shall send a written notice to the Tenant specifying the date and time for its delivery. The Tenant shall place the Area at disposal of the Landlord, in the condition in which it was received, with no wear and tear other than the normal due to its own use, it shall be free of all occupants in any capacity and the keys shall be handed over along with receipts proof of the payment of public services, until the last day on which the Area was physically occupied, on the business day following the expiration of the respective period. Any improvement introduced by the Tenant may, at his sole discretion, be withdrawn, or may be left to the benefit of the Area, in which case it shall not be entitled to any consideration for such improvements. The expenses incurred by the Tenant that were originated as a result of or on the occasion of the restitution of the Area, shall be of its exclusive charge and cost.


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In the event that the Landlord does not notify the date and time of delivery of the Area within five (5) calendar days following the effective termination of the Agreement, the Tenant shall be responsible for sending notice to the Landlord indicating said time.

In the event that the Landlord fails to return the Area on the stipulated date by the Tenant or refuses to receive, such circumstance shall be recorded in the restitution act. In this case, the Tenant shall provisionally deliver the Area in accordance with the Article 24 of Law 820 of 2003.

Fifteenth - Agreement Termination. The Parties may terminate this Agreement or the promissory lease with option to sale and purchase agreement, without being object of ay indemnity, when any of the following events occurs, in addition to those established by this Agreement and imposed by Law:

(a)
Termination by either Party

i.  
Damage or destruction of the Area and/or Property, when said damage or destruction is of such magnitude as to prevent the normal use and enjoyment of the Tenant.
ii.  
By dissolution or declaration of compulsory liquidation of any of the Parties.
iii.  
By judicial conviction or inclusion of the Parties and/or any of their administrators in the Specially Designated Nationals and Blocked Persons List, issued by the Office of Foreign Assets Control of the United States Department of Treasury (“OFAC”) and/or in any similar list issued by the OFAC or any similar entity, in accordance with any authorization, executive order or regulation. Those shall be in written form.
iv.  
The mutual agreement between the Parties, which must be in written form.

(b)
Termination by the Tenant

i.  
The impossibility of using the Area for the purposes agreed upon this Agreement, due to the urban planning and use regulations in force or that shall be governed in the future by judicial rulings, administrative or police decisions that so order.
ii.  
By revocation, denial or termination of the required licenses or permits for the operation of the activities to which the Area shall be assigned for.


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iii.  
If the Tenant fails to make the necessary repairs to the purpose of this Agreement and this failure causes damage to the Landlord.

(c)
Termination by the Tenant

i. 
The breach of Agreement or arrears of more than two (2) consecutive months in the payment of the established fee and interest on arrears at the maximum rate provided by law.

ii. 
If the Tenant uses the Area for a purpose other than that specified in the Agreement.

iii. 
The Landlord and Seller, shall have total freedom and priority to lease or sell all or part of the property object of the Promissory Lease and Sale Agreement, as long as the recipient or beneficiary (Buyer or lessee), are public, mixed or private companies in the Hydrocarbons and/or Communications sector, without requiring any prior or express formality or authorization. This situation shall be notified at any time to the Tenant and Buyer, being understood the object and/or possible early termination of the Agreement has been modified as of right and without any additional formality requirement.

iv. 
If the Tenant and Buyer have not made use of or have not initiated either the sowing or the purchase of the areas of the property, subject of the Promissory Lease and Purchase Option Agreement within the first nine (9) months of the time established as the initial date of the Agreement, the Landlord and Seller with a Sale Option, may, in whole or in part, dispose of, use, enjoy, negotiate, contract, assign and in general any activity or agreement freely over the area of the property object of this Agreement, without any requirement, formality, notification or similar, and without accepting any type of penalty, indemnity or sanctions of any kind. Consequently, the contract will be unilaterally terminated for just cause due to the expiration of this agreed term, totally or partially, a faculty that is reserved by the Landlord and Seller.

v. 
At any time, the Landlord and Seller may terminate this Agreement and areas not delivered by means of minutes, without justification or application of penalties, provision, penalty, or indemnity of any kind.

Sixteenth Provision - Early Termination. In the event that the Tenant terminates the Promissory Lease with purchase option agreement on total or partial areas delivered mid-minute in advance and without just cause and at any time, he shall give sixty (60) days’ notice prior to the effective date intended as termination of the Agreement and shall be obliged only to pay to the Landlord, an amount of money equivalent to four current fees at the date of termination.


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Paragraph. In the event that the Tenant early terminates the Agreement on the terms set forth in this Provision, there shall be no application of the Penalty Provision or collection of any additional sums on any title.

Seventeenth Provision - Penalty Provision. The gross breach of the obligations set forth in this Agreement for the Parties shall give rise to the payment of a penalty equivalent to seventy-two million pesos (COP $72,000,000.00) (the "Penal Provision").

The Parties recognize the executive merit of this provision for the purpose of enforceably collecting any sum of money owed by the non-performing Party to the performing Party in connection with the object and obligations of the Agreement and of the Promissory Lease with purchase option Agreement on total or partial Areas delivered by means of minutes. It shall be understood in any case, that the Penal Provision is of a sanctioning nature, wherefore, this Provision does not extinguish the obligation to comply with any of the obligations agreed in this Agreement, and it shall not make it impossible for the affected Party, in the event of a breach, to request the damages caused by the same, that is to say, the Party that has fulfilled its obligations may request both the payment of the penalty and the compensation for the pertinent damages, including, among others, the payment of the lease fees that are missing until the termination date of the Agreement or its extensions or renewals agreed in Fifth Provision of this Agreement, for the value that would correspond to the sowing of half of the hectares that make up the Area. The Parties expressly waive any private or judicial requirement to constitute arrears in the payment of this or any other obligation arising under the Agreement.

Paragraph. The breach referred to in this Provision must be classified, that is to say, gross and preventing the performance of the Agreement or making its performance more onerous or difficult. The Performing Party shall classify the severity of the breach.

Eighteenth Provision - Statements and warranties. THE PARTIES represent and warrant:

(a) 
That they are a legal entity legally established in accordance with the laws of their domicile.

(b) 
That, for the celebration and the fulfillment of this Agreement, they have all the corporate and legal authorizations and faculties and have taken all the necessary corporate actions, including the authorizations of the respective corporate bodies, to be able to celebrate and perform this Agreement.


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(c) 
That the effectiveness, enforceability, subscription, celebration and/or performance of this Agreement does not require the granting of approval, consent, permission, order, license, authorization, declaration, presentation or report from any person.

(d) 
That the information provided is truthful, complete, accurate, up to date, verifiable and comprehensible. Likewise, the information to be provided to the Tenant in performance of the Contract shall be truthful, complete, accurate, up to date, verifiable and comprehensible.

(e) 
The Landlord represents that the Contract has been duly celebrated and subscribed, and constitutes a source of legal, valid, binding and enforceable obligations in accordance with its regulations.

(f) 
The Landlord represents that the Property is exempt from all charges, encumbrances, ownership restrictions, leases, or any judicial or extrajudicial measure that limits or restricts his/ her right to lease the Property or the Area.

(g) 
The lessor declares that, in addition to the open mortgage that falls on the Property, and which is recorded in notation 011 of the eighteenth of December 2009 of the property registration number folio, to date he/she is not aware of any situation that limits or threatens to limit or restrict the use, enjoyment and disposition of the Property or the Area, including threats of a civil nature to the ownership, possession or free disposition, nor has he/she been notified of or identified any circumstance of a regulatory, urban, environmental or health nature that could affect the development of the object of this Agreement.

(h) 
The Landlord represents that the Property, at the date of subscription of this Agreement, is up to date in the payment of all taxes such as property tax, valuation charge, participation in capital gain and in general, other concepts related to the maintenance of the Property.

(i) 
The Landlord represents that he/she is solely and exclusively responsible for any possible complaint regarding the right to and/or ownership of the Property. In this sense, it releases in a long-term the Tenant from all liability for judicial and / or extrajudicial complaints that may arise against the Tenant.


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Nineteenth Provision - Indemnity. The Landlord shall indemnify the Tenant from and against any action, complaint, suit, loss, liability, damage, costs and/or expenses that the Tenant may suffer as a result of any breach of the obligations under this Agreement, or any judicial or extrajudicial claim by reason of acts or obligations that are his/her responsibility under this Agreement or relating to the Property.

First Paragraph. The Landlord agrees to defend the Tenant from all claims, judicial or extrajudicial, for the foregoing reasons, arising out of the performance of this Agreement and to acknowledge the costs associated with such defense, including attorneys' fees.

Second Paragraph. This same provision shall apply bilaterally between the parties.

Twentieth Provision - Authorization for the execution of future legal transactions. On the total or partial Areas delivered by means of minutes, the Landlord must prior notify the Tenant in order to celebrate legal transactions involving areas totally or partially delivered by means of minutes, such as, but not limited to, constituting a guarantee, entering into purchase and sale agreements or purchase and sale promissory agreements, entering into new lease agreements, or subjecting the Property to easements..

Twentieth First Provision - Condition Subsequent. The Tenant must sign and submit to the Landlord a title research study on the Property within three months of the Start Date. In the event that this study is unfavorable, the Tenant may terminate the Agreement, without there being any payment in favor of the Landlord.

The title research study shall constitute an integral part of this Agreement and shall be included in Exhibit No. 5.

Twenty-second Provision - Abandonment. In the event of a proven and total abandonment of the Area for more than sixty (60) business days, the Tenant expressly authorizes the Landlord to enter the Area and recover his/her custody, with the only requirement of the presence of two (2) witnesses, in an attempt to avoid the deterioration or dismantling of the Area, provided that the Area remains abandoned or uninhabited for the same term, and that the exposure to the risk resulting from the abandonment is such that it threatens the physical integrity of the property or the security of the neighborhood.

Twenty-third Provision - Preemptive Right. The Landlord shall grant the Tenant a preemptive right over the total or partial areas delivered by means of the minutes, which shall be executed in accordance with the provisions of this provision, during the term of the future lease and its extensions. In the event that the Landlord receives a formal offer to purchase from a third party other than a related party, affiliate or subordinate of the Landlord involving the Area, in whole or in part delivered by means of minutes and that the Landlord has an interest in accepting, he/she shall notify the Tenant in writing of the conditions offered by the interested third party.


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The Tenant shall have a period of fifteen (15) business days from the date of receipt of the written notice by the Landlord to express its interest by written notice. In the event that the Tenant does not express his/her interest or his/her response is negative, the Landlord may freely celebrate the purchase and sale agreement with the interested third party under the same conditions offered to the Tenant. In the event that the sale and purchase with the third party fails, the preemptive right shall remain effective. In the event that a third party acquires the Property and/or the Area, the Landlord must guarantee that the latter will accept and respect the Contract.

In the event that the formal purchase offer is made by a related party, affiliate or subordinate of the Landlord (“Affiliate”), the purchase may only be made with the prior written authorization of the Tenant, and the Landlord shall guarantee the assignment of the Contract to the Affiliate on the same terms and conditions set forth in the Contract.

Paragraph. In the event that the Tenant expresses an interest in the terms set forth in this Provision, the procedure set forth in Clause Twenty-Four of this Agreement shall be followed for purposes of carrying out the corresponding Appraisal and Transfer process.

Twenty-Fourth Provision - Purchase Option. The Tenant with a Purchase Option shall have the option to purchase the total or partial areas delivered by means of the minutes or the Leased Property (the "Purchase Option"), for himself, or for the third parties indicated by him, the Purchase Option shall be governed by the rules as follows:

i.
The purchase and sale price shall be that agreed upon by the parties based on the corporate appraisal carried out by the Lonja de Propiedad Raíz of Bogotá, which shall be contracted by the Tenant with an Option to Purchase within six (6) months following the Starting Date, and shall be indexed to the date on which the notification of the intention to purchase the Property is made, increasing in a proportional manner equal to that of the Consumer Price Index.

This appraisal shall become an integral part of this Agreement and shall be included in Exhibit No. 4.

ii.
The Purchase Option may be exercised in whole or in part by the Tenant with the Purchase Option at any time during the Term of the Contract contemplated in the Fourth Provision of this Agreement, excluding its extensions (the "Term of effectiveness of the Option").

iii.
The Tenant with an Option to Purchase, at any time during the Term of Effectiveness of the Option to Purchase, must communicate in writing to the Landlord with an Option to sale, the will to exercise the Option to Purchase, indicating in such communication the documents required for the performance of due diligence on the Leased Property (the "Due Diligence Documents"), which will be, but not limited to, registered public deeds on the Property, proof of payment of trade taxes, building permits, information on disputes, precautionary measures, liens or encumbrances on the Leased Property, among other documents of a similar nature.

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iv.
The Landlord shall, within ten (10) business days of receiving the notice, forward the Due Diligence Documents to the Tenant. Once the Due Diligence Documents have been received, the Tenant shall have a term of fifteen (15) business days to carry out the due diligence process of the Properties.

v.
Once the legal due diligence process of the Properties has been satisfactorily completed, at the discretion of the Tenant with Purchase Option, the Parties, within fifteen (15) business days following the expiration of the period for carrying out the due diligence process, shall sign the promissory Sale and Purchase Agreement in which the price, the method of payment of the Sale and Purchase Price, and other conditions for executing the purchase and sale agreement on the Properties shall be specified.

vi.
With a prior written agreement, the Parties may grant the public deed of sale and Purchase or the document by means of which the sale of the Properties is understood to be executed, without the need to exhaust the subscription stage of the Promissory Sale and Purchase Agreement.

The Landlord with Sale Option shall be obliged to sell to the Tenant with Purchase Option, the property of the Area object of the present Agreement, in case he notifies his/her intention to make this purchase. For these purposes, the Tenant with a Purchase Option may communicate this decision, at the latest, one month before the maximum date foreseen for the duration of this Agreement.

Paragraph: In the event of an offer from a third party, the price may not be lower than the price being offered by the third party in order to meet the purchase option.

Twenty-fifth Provision - Encumbrance Settlement.  The Landlord must communicate to the Tenant, within fifteen (15) business days following the Start Date, the value of the debt corresponding to the Open Mortgage that corresponds to the Property, and which is recorded in notation 018 of the Property Registration Number folio. The Landlord with Sale Option must pay this debt, within the following 2 months from the Starting Date.

Twenty-sixth Provision - Payment of the credit and acquisition of the property. Notwithstanding the provisions of Provision Twenty-Four of this Agreement, and subject to prior agreement between the parties, the Tenant with an Option to Purchase, may acquire all or part of it in his/her own name, or in the name of the third party indicated by the latter, within 3 months after obtaining the results of both the title research study described in Provision Twenty-First and the appraisal referred to in Provision Twenty-Four of this Agreement, a percentage of the property or the number of hectares of the Property, at his/her option, paying directly to the creditor the debt corresponding to the encumbrance referred to in Paragraph Twenty-Six of this Agreement.


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The estimation of the percentage of property or of the hectares that may be acquired by this means shall be In the event that the Tenant with an Option to Purchase decides to make use of this power, the parties shall agree on the terms of business and formalization.

Once the particular terms have been agreed between the parties, they must sign the purchase and sale agreement, in which the other conditions for perfecting the Purchase and Sale Agreement on the Property will be specified.

The acquisition of a percentage of the property or an amount of hectares of the Property will results in an automatic reduction of the fee, in the same proportion. This shall be reflected in the following invoice provided by the Landlord.

Twenty-seventh Provision - Notices. Any notice or other required or permitted communication under this Agreement must be in writing and must be personally delivered or transmitted by fax or electronic mail or sent by courier to the specified counterparty at the following address:

Landlord with Sale Option: Calle 5 No 38 - 25   office 416 Building Plaza San Fernando, Cali, Valle.
Email: palagua2004@gmail.com

Tenant with Purchase Option: Carrera 25 No 29-87 Local 17, Floridablanca, Santander.
Email: director@cosechemosya.co

Either Party may change their address for the purposes of this Agreement by informing the new address by written notice to the other Party in the manner aforementioned. Any notice given pursuant to the foregoing shall be deemed to be delivered upon personal delivery, if so sent, upon receipt of confirmation, if sent by fax or e-mail, or on the 5th day of dispatch by specialized mail or Courier, if sent by mail, but if delivered in a manner different from that set forth above, such notice shall be deemed to be delivered when it is effectedly received.


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In the case of receiving two (2) or more adversarial notices, the one with the most recent date will always prevail.

Twenty-eighth Provision - Amendment. This instrument contains the entire agreement between the Parties regarding the subject matter hereof, and supersedes any other agreement or negotiation, written or oral, which the parties may have celebrated prior to this contract. No amendment to the Agreement shall be deemed effective unless agreed to in writing.

Likewise, any amendment to the provisions of this instrument must be included in writing and duly signed by the authorized representatives of the Parties, without any Party being able to invoke any agreement or oral commitment of any kind that modifies, extends or renews the terms and content of the provisions of this agreement.

Twenty-ninth Provision - Expenses. Any expenses incurred in the celebration of this Agreement shall be borne by the Parties in equal proportions.

Thirtieth Provision - Exhibits.

No.
Description
Exhibit 1
Landlord Legal Representation Instruments.

Exhibit 2
Tenant Legal Representation Instruments.

Exhibit 3
Boundaries Deed, taken from Public Deed No. 970 of the 30th of September of 2005, granted through the Sole Notary of Puerto Boyacá.

Exhibit 4
Corporate appraisal carried out by the Lonja de Propiedad Raíz of Bogotá.

Exhibit 5
Title research study.


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For the record, this document is signed by the Parties in the city of Bogotá, D.C. on the twenty-seventh (27th) day of December 2018.


/s/Margarita Maria Mendez Caicedo
WALDSHUT C.V.,
Margarita María Méndez Caicedo
ID No. 1.130.667.987


/s/Oscar Mauricio Franco Ulloa
COSECHEMOS YA S.A.S.,
Oscar Mauricio Franco Ulloa
ID No. 79.596.227


PROMISSORY LEASE WITH OPTION TO SALE AND PURCHASE AGREEMENT IN RELATION TO BOCAS DE PALAGUA AND TIERRA PROMETIDA PROPERTIES ACCORDING TO CONVEYANCE CERTIFICATE NO. 088-6222
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Among the undersigned, namely:


(i) VICALVARO C.V., legally represented in this act by Margarita María Méndez Caicedo, of legal age, holder of Colombian Identification No. 1.130.667.987, who serves in this act in her capacity as special attorney-in-fact, as evidenced by the power of attorney registered at the 5th (fifth) Notary of Cali, Deed No. 405 of the 17th of February of 2017 and whose power of attorney is valid until the 31st of December of 2018, acting as Exhibit No. 1 (the Landlord with Option to Sale”), and, on the other hand,

(ii)    COSECHEMOS YA S.A.S., identified with NIT Number con 900.969.918-1, legally represented in this act by Oscar Mauricio Franco Ulloa, of legal age, holder of Colombian Identification No. 79.596.227, who serves in this act in his capacity as legal representative, as stated in the Certificate of Incorporation and Legal Representation issued by the Chamber of Commerce Bucaramanga, acting as Exhibit No.2 (the “Tenant with Option to Purchase”).

The Landlord with Option to Sale and the Tenant with Option to Purchase shall be individually referred as Partyand collectively as the Parties, have agreed to celebrate into a promissory lease with option to commercial sale and purchase (hereinafter the agreement) that shall be ruled in accordance with the applicable legal rules and, in particular, y the following clauses and prior the following:

CONSIDERATIONS:

1.
The parties celebrate into this agreement on 1,432 hectares (the Area”) of the property located in the village Palagua, rural area of the municipality of Puerto Boyacá, department of Boyacá, identified with the real estate registration No. 088-6222 of the County Recorder’s Office of Puerto Boyacá and the cadastral certificate No. 155720001000000040212000000000, land properties BOCAS DE PALAGUA Y TIERRA PROMETIDA (the “Property”).

2.
The Tenant with Option to Purchase, shall destine the Property to labors related to cannabis cultivation with medicinal and scientific purposes, other activities of production and transformation associated to these and activities included within its business purpose.

That the Parties have been carrying out negotiations and in order to reflect the agreements, have decided to leave in the Agreement each one of the arrangements thus:


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PROVISIONS

First Provision - Purpose. Under this Agreement, the Landlord with Option to Sell promises to deliver the tenancy, as a lease with option to sell, to the Tenant with Option to Purchase, who in turn promises to receive the same title for his use and enjoyment, in relation to a land of 1,432 hectares, (the “Area”), which is located within the property in the village Palagua, rural area of the municipality of Puerto Boyacá, Department of Boyacá, identified with the real estate registration No. 088-6222 of the County Recorder´s Office of Puerto Boyacá and the cadastral certificate No. 155720001000000040212000000000, land properties BOCAS DE PALAGUA Y TIERRA PROMETIDA (the “Property”). The property is described and determined according to the sides taken from public Deed No, 1644 of the 4th of June of 1990, granted by the second (2nd) Notary of Armenia (the “Property”), which are in Annex No. 3 of the present Agreement.

Paragraph. The Landlord with Option to Sale, expressly states that lease and sell and purchase option of the Area includes the entitlement to the use and enjoyment of improvements, easements, uses and annexes found on the Property.

Second Provision - Destination. The Tenant with Option to Purchase, is obliged to destine the Area for labors related to cannabis cultivation with medicinal and scientific purposes, other activities of production and transformation associated to these and activities included within its business purpose, in accordance with the Certificate of Incorporation and Legal Representation issued by the Chamber of Commerce Bucaramanga and in specific, nonetheless not being limited to: the development of agricultural and/or agro-industrial, medicinal and scientific activities, especially but nonetheless not being limited to the manufacture of cannabis derivatives for national use and scientific research, manufacture for exporting, cultivation of cannabis for medicinal and scientific purposes, of seeds for planting and the cultivation of cannabis plants, for medicinal, scientific and industrial uses and research, including the storage of inputs, derivate products, by-products, raw materials and other forms of licenses that are allowed to the Tenant in accordance to with the current legislations, including Law 1787 of 2016, Decree 613 of 2017, Decree 780 of 2016, Resolution 2891 of 2017 and Resolution 2892 of 2017 issued by the Ministry of Health and Social Protection, Resolution 3168 of 2015 issued by the Colombian Agricultural Institute, and other regulations currently in force issued by the competent authorities and those issued after the signing of the present document.


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Paragraph. By virtue of this Agreement, the Landlord with Option to Sell, as owner of the Property, expressly authorizes the Tenant with Option to Purchase, to make use of the Area for the implementation, development and cultivation of cannabis plants for medicinal and scientific uses as well as other agricultural and/or agro industrial purposes directly or indirectly related to said activities, in accordance with the provision of the licenses granted by the competent authorities to the Tenant, including the production of seeds authorized or registered within the Colombian Agricultural Institute.

Third Provision - Price. The value of the Area´s monthly rental fee (the “Fee”) shall be:

1.
Ninety-five thousand eight hundred-nine Colombia pesos (COP $95.879), monthly for each hectare, which shall be in force from the beginning of the use of each hectare, in accordance with the delivery certificates signed by the parties.

2.
The Tenant with Option to Purchase shall request from the Landlord the delivery of the total or partial Area corresponding with at least ten working days prior to its use, and it is obliged not to use additional areas without the corresponding delivery certificates being executed and subscribed.

The Tenant with Option to Purchase is obliged top at the Fee within ten (10) business days following the date of receipt of the invoice sent, as referred to in the first paragraph of this clause.

First Paragraph. Invoice Radication. The Landlord with Option to Sell shall file a monthly electronic invoice for the fee’s collection at the following e-mail address:  director@cosechemosya.co

Second Paragraph. Form of Payment. The Tenant shall pay the Fee in favor of Agrícola y Ganadera Palagua Ltda, Nit No. 830.145.497 in the current account No. 12250407792 of Bancolombia. The bank account change in order to make effective the fee consignation shall be informed by means of notification.

Third Paragraph. Fee adjustment. Upon expiration of the first year of the Agreement, the Fee shall be increased automatically without the need for any requirement between the Parties, in a proportion equal to the consumer Price index (CPI) increase, this being certified by the DANE for the 12 months immediately prior to the date in which readjustments are to be made.


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Fourth Paragraph. Grace period. The Landlord with Option to Sell, shall grant in favor of the Tenant with Option to Purchase, a grace period to be agreed upon by the Parties when they deem as convenient, within the mentioned grace period, no fee shall be caused, nonetheless, the Tenant with Option to Purchase shall be held responsible for the payment of the corresponding public services (the “Grace Period”).

Fourth Provision – Duration of the Agreement. The present Agreement shall have duration of nine months as of its subscription, on the total and / or partial areas delivered during said period.

The promissory lease with option to sale and purchase agreement shall have an initial term of five (5) years, counted from the date of receipt of the property or the Total or Partial Area, which includes the Grace Period.

Fifth Provision – Automatic carryover. The present promissory lease agreement shall not be carried over and shall be terminated at the end of the term, over the Total or Partial Areas not delivered by means of an act.

Without prejudice to the renewal right granted by law, upon expiration of the initial term or carryovers of the promissory lease with option to sale and purchase agreement, the Agreement shall me automatically extended for a term of five (5) years, unless either of the parties sends to the other a written notice of intent to terminate the Agreement, three (3) months prior to the termination date of the Agreement or any of its carryovers.

Sixth Provision – Delivery. The Landlord with Option to Sell, shall deliver to the Tenant with Option to Purchase when so requested at least ten (10) business days prior and when the areas are available. The Landlord with Option to Sell shall deliver the Area, with all its annexes, improvements, uses and customs, without prejudice to the grace period that may have been agreed upon by the parties provided in the fourth Paragraph of the Third Provision.

Seventh Provision – Obligations of the Landlord. The following are the stipulated obligations of the Landlord, without prejudice to those imposed by law and on the areas that are delivered by the means of an act:

(a)
To allow the peaceful use and enjoyment of the total or partial Area delivered.
(b)
To release the Tenant from any disturbance in the normal and full enjoyment of the total or partial Area delivered.
(c)
To receive the payment of the fee on the total or partial Area delivered.
(d)
To file the accounts receivable or invoice of the lease fee.


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(e)
To allow the Tenant, with prior express written authorization, to make improvements and adjustments in the Area for its adaptation and use, in accordance with the Agreement Provisions. Being understood that the same will access the property and in event of termination and restitution, shall not be recognized to the Tenant.
(f)
To carry out all necessary acts to prevent the imposition of any judicial or extrajudicial lien or precautionary measure that affects the free holding of the Area and/or the Property that do not correspond to the use or destination of the Area delivered by the Tenant.
(g)
To receive the Area upon termination of the Agreement, as determined in the mentioned.
(h)
(i)
To notify to the Tenant prior to entering into any legal business involving areas wholly or partially delivered.
All other law provisions as well as those stipulated on this Agreement.

Eighth Provision – Obligations of the Landlord. The following are the stipulated obligations of the Tenant, without prejudice to those imposed by law:

(a)
To pay the Fee in accordance with the provisions of this Agreement.
(b)
To use and enjoy the Area in accordance with this Agreement, without changing its destination.
(c)
To watch over and care for the conservation of the property and/or Area and those things received in rent. To carry out timely and at its own expense repairs or replacements
(d)
To restitute the property and/or Areas at the termination of the Agreement, in the state in which they were delivered according to the arrangements herein agreed, to restitute the property with all services and annexes totally up to date and fully discharged of its obligations.
(e)
To comply with all requirements set forth in the regulations in force to the operation and use of the property and/or Area, including obtaining all permits and licenses required in relation to the operation and maintenance
(f)
All other law provisions as well as those stipulated on this Agreement. 

Ninth Provision. The Tenant undertakes to go out to the Tenant’s sanitation in the events of encumbrances and redhibitory vices that affect the agreed use of the Area.


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Similarly, the Tenant declares that the Property is free of encumbrances that may affect its use and enjoyment.

Tenth Provision – Local Repairs. The Tenant shall be in charge of carrying out the local repairs in the Area in accordance to the terms of article 1985 of the Colombian Civil Code.

Eleventh Clause – Public Services. From the total or partial delivery of the area, according to the subscribed acts and up to the restitution date, the Tenant shall be obliged to pay for the public services regarding energy, telephone lines, aqueduct, and sewerage and garbage collection. If, as a consequence of not timely payment of public services, the respective companies suspend them, withdraw the meter or telephone lines, the Tenant shall charged with the late payment penalties interests, penalties and expenses that demand reconnection. The Tenant may, without any limitation, install its own telephone line(s), power transformers and water suction pumps, which may be withdrawn upon termination of the Agreement.

Paragraph. The Landlord shall cooperate as owner of the Property by means of authorizations in order to carry out the claims and formalities required for the purpose of restoring the service or adequately provided by the respective companies.

Twelfth Provision – Lease Transfer. The Tenant is NOT authorized, by signing this Agreement, to transfer its contractual position, and shall require the Landlord’s express written permission.  The transfer of the contractual position by the Landlord, or any of the rights emanating from the Agreement shall NOT require the authorization of the Tenant.

Thirteenth Provision - Sublease. In the event that the Tenant tends to sublet partially or wholly the Area to a third party, it must be prior, written and expressly authorized by the Tenant.

Fourteenth Provision – Area Restitution. For the restitution of the partial or whole delivered Area, once the Agreement is terminated or any of its extensions or carryovers, the Landlord shall send a written notice to the Tenant specifying the date and time for its delivery. The Tenant shall place the Area at disposal of the Landlord, in the condition in which it was received, with no wear and tear other than the normal due to its own use, it shall be free of all occupants in any capacity and the keys shall be handed over along with receipts proof of the payment of public services, until the last day on which the Area was physically occupied, on the business day following the expiration of the respective period. Any improvement introduced by the Tenant may, at his sole discretion, be withdrawn, or may be left to the benefit of the Area, in which case it shall not be entitled to any consideration for such improvements. The expenses incurred by the Tenant that were originated as a result of or on the occasion of the restitution of the Area, shall be of its exclusive charge and cost.


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In the event that the Landlord does not notify the date and time of delivery of the Area within five (5) calendar days following the effective termination of the Agreement, the Tenant shall be responsible for sending notice to the Landlord indicating said time.

In the event that the Landlord fails to return the Area on the stipulated date by the Tenant or refuses to receive, such circumstance shall be recorded in the restitution act. In this case, the Tenant shall provisionally deliver the Area in accordance with the Article 24 of Law 820 of 2003.

Fifteenth – Agreement Termination. The Parties may terminate this Agreement or the promissory lease with option to sale and purchase agreement, without being object of ay indemnity, when any of the following events occurs, in addition to those established by this Agreement and imposed by Law:

(a)
Termination by either Party

i.  
Damage or destruction of the Area and/or Property, when said damage or destruction is of such magnitude as to prevent the normal use and enjoyment of the Tenant.
ii.  
By dissolution or declaration of compulsory liquidation of any of the Parties.
iii.  
By judicial conviction or inclusion of the Parties and/or any of their administrators in the Specially Designated Nationals and Blocked Persons List, issued by the Office of Foreign Assets Control of the United States Department of Treasury (“OFAC”) and/or in any similar list issued by the OFAC or any similar entity, in accordance with any authorization, executive order or regulation. Those shall be in written form.
iv.  
The mutual agreement between the Parties, which must be in written form.

(b)
Termination by the Tenant

i.  
The impossibility of using the Area for the purposes agreed upon this Agreement, due to the urban planning and use regulations in force or that shall be governed in the future by judicial rulings, administrative or police decisions that so order.


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ii.  
By revocation, denial or termination of the required licenses or permits for the operation of the activities to which the Area shall be assigned for..
iii.  
If the Tenant fails to make the necessary repairs to the purpose of this Agreement and this failure causes damage to the Landlord.

(c)
Termination by the Tenant

i. 
The breach of Agreement or arrears of more than two (2) consecutive months in the payment of the established fee and interest on arrears at the maximum rate provided by law.

ii. 
If the Tenant uses the Area for a purpose other than that specified in the Agreement.

iii. 
The Landlord and Seller, shall have total freedom and priority to lease or sell all or part of the property object of the Promissory Lease and Sale Agreement, as long as the recipient or beneficiary (Buyer or lessee), are public, mixed or private companies in the Hydrocarbons and/or Communications sector, without requiring any prior or express formality or authorization. This situation shall be notified at any time to the Tenant and Buyer, being understood the object and/or possible early termination of the Agreement has been modified as of right and without any additional formality requirement.

iv. 
If the Tenant and Buyer have not made use of or have not initiated either the sowing or the purchase of the areas of the property, subject of the Promissory Lease and Purchase Option Agreement within the first nine (9) months of the time established as the initial date of the Agreement, the Landlord and Seller with a Sale Option, may, in whole or in part, dispose of, use, enjoy, negotiate, contract, assign and in general any activity or agreement freely over the area of the property object of this Agreement, without any requirement, formality, notification or similar, and without accepting any type of penalty, indemnity or sanctions of any kind. Consequently, the contract will be unilaterally terminated for just cause due to the expiration of this agreed term, totally or partially, a faculty that is reserved by the Landlord and Seller.

v. 
At any time, the Landlord and Seller may terminate this Agreement and areas not delivered by means of minutes, without justification or application of penalties, provision, penalty, or indemnity of any kind.




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Sixteenth Provision – Early Termination. In the event that the Tenant terminates the Promissory Lease with purchase option agreement on total or partial areas delivered mid-minute in advance and without just cause and at any time, he shall give sixty (60) days’ notice prior to the effective date intended as termination of the Agreement and shall be obliged only to pay to the Landlord, an amount of money equivalent to four current fees at the date of termination.

Paragraph. In the event that the Tenant early terminates the Agreement on the terms set forth in this Provision, there shall be no application of the Penalty Provision or collection of any additional sums on any title.

Seventeenth Provision – Penalty Provision. The gross breach of the obligations set forth in this Agreement for the Parties shall give rise to the payment of a penalty equivalent to seventy-two million pesos (COP $72,000,000.00) (the "Penal Provision").

The Parties recognize the executive merit of this provision for the purpose of enforceably collecting any sum of money owed by the non-performing Party to the performing Party in connection with the object and obligations of the Agreement and of the Promissory Lease with purchase option Agreement on total or partial Areas delivered by means of minutes. It shall be understood in any case, that the Penal Provision is of a sanctioning nature, wherefore, this Provision does not extinguish the obligation to comply with any of the obligations agreed in this Agreement, and it shall not make it impossible for the affected Party, in the event of a breach, to request the damages caused by the same, that is to say, the Party that has fulfilled its obligations may request both the payment of the penalty and the compensation for the pertinent damages, including, among others, the payment of the lease fees that are missing until the termination date of the Agreement or its extensions or renewals agreed in Fifth Provision of this Agreement, for the value that would correspond to the sowing of half of the hectares that make up the Area. The Parties expressly waive any private or judicial requirement to constitute arrears in the payment of this or any other obligation arising under the Agreement.

Paragraph. The breach referred to in this Provision must be classified, that is to say, gross and preventing the performance of the Agreement or making its performance more onerous or difficult. The Performing Party shall classify the severity of the breach.

Eighteenth Provision– Statements and warranties. THE PARTIES represent and warrant:

(a) 
That they are a legal entity legally established in accordance with the laws of their domicile.

(b) 
That, for the celebration and the fulfillment of this Agreement, they have all the corporate and legal authorizations and faculties and have taken all the necessary corporate actions, including the authorizations of the respective corporate bodies, to be able to celebrate and perform this Agreement.

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(c) 
That the effectiveness, enforceability, subscription, celebration and/or performance of this Agreement does not require the granting of approval, consent, permission, order, license, authorization, declaration, presentation or report from any person.

(d) 
That the information provided is truthful, complete, accurate, up to date, verifiable and comprehensible. Likewise, the information to be provided to the Tenant in performance of the Contract shall be truthful, complete, accurate, up to date, verifiable and comprehensible.

(e) 
The Landlord represents that the Contract has been duly celebrated and subscribed, and constitutes a source of legal, valid, binding and enforceable obligations in accordance with its regulations.

(f) 
The Landlord represents that the Property is exempt from all charges, encumbrances, ownership restrictions, leases, or any judicial or extrajudicial measure that limits or restricts his/ her right to lease the Property or the Area.

(g) 
The lessor declares that, in addition to the open mortgage that falls on the Property, and which is recorded in notation 011 of the eighteenth of December 2009 of the property registration number folio, to date he/she is not aware of any situation that limits or threatens to limit or restrict the use, enjoyment and disposition of the Property or the Area, including threats of a civil nature to the ownership, possession or free disposition, nor has he/she been notified of or identified any circumstance of a regulatory, urban, environmental or health nature that could affect the development of the object of this Agreement.

(h) 
The Landlord represents that the Property, at the date of subscription of this Agreement, is up to date in the payment of all taxes such as property tax, valuation charge, participation in capital gain and in general, other concepts related to the maintenance of the Property.

(i) 
The Landlord represents that he/she is solely and exclusively responsible for any possible complaint regarding the right to and/or ownership of the Property. In this sense, it releases in a long-term the Tenant from all liability for judicial and / or extrajudicial complaints that may arise against the Tenant.


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Nineteenth Provision – Indemnity. The Landlord shall indemnify the Tenant from and against any action, complaint, suit, loss, liability, damage, costs and/or expenses that the Tenant may suffer as a result of any breach of the obligations under this Agreement, or any judicial or extrajudicial claim by reason of acts or obligations that are his/her responsibility under this Agreement or relating to the Property.

First Paragraph. The Landlord agrees to defend the Tenant from all claims, judicial or extrajudicial, for the foregoing reasons, arising out of the performance of this Agreement and to acknowledge the costs associated with such defense, including attorneys' fees.

Second Paragraph. This same provision shall apply bilaterally between the parties.

Twentieth Provision – Authorization for the execution of future legal transactions. On the total or partial Areas delivered by means of minutes, the Landlord must prior notify the Tenant in order to celebrate legal transactions involving areas totally or partially delivered by means of minutes, such as, but not limited to, constituting a guarantee, entering into purchase and sale agreements or purchase and sale promissory agreements, entering into new lease agreements, or subjecting the Property to easements..

Twentieth First Provision Condition Subsequent. The Tenant must sign and submit to the Landlord a title research study on the Property within three months of the Start Date. In the event that this study is unfavorable, the Tenant may terminate the Agreement, without there being any payment in favor of the Landlord.

The title research study shall constitute an integral part of this Agreement and shall be included in Exhibit No. 5.

Twenty-second Provision - Abandonment. In the event of a proven and total abandonment of the Area for more than sixty (60) business days, the Tenant expressly authorizes the Landlord to enter the Area and recover his/her custody, with the only requirement of the presence of two (2) witnesses, in an attempt to avoid the deterioration or dismantling of the Area, provided that the Area remains abandoned or uninhabited for the same term, and that the exposure to the risk resulting from the abandonment is such that it threatens the physical integrity of the property or the security of the neighborhood.


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Twenty-third Provision- Preemptive Right. The Landlord shall grant the Tenant a preemptive right over the total or partial areas delivered by means of the minutes, which shall be executed in accordance with the provisions of this provision, during the term of the future lease and its extensions. In the event that the Landlord receives a formal offer to purchase from a third party other than a related party, affiliate or subordinate of the Landlord involving the Area, in whole or in part delivered by means of minutes and that the Landlord has an interest in accepting, he/she shall notify the Tenant in writing of the conditions offered by the interested third party. The Tenant shall have a period of fifteen (15) business days from the date of receipt of the written notice by the Landlord to express its interest by written notice. In the event that the Tenant does not express his/her interest or his/her response is negative, the Landlord may freely celebrate the purchase and sale agreement with the interested third party under the same conditions offered to the Tenant. In the event that the sale and purchase with the third party fails, the preemptive right shall remain effective. In the event that a third party acquires the Property and/or the Area, the Landlord must guarantee that the latter will accept and respect the Contract.

In the event that the formal purchase offer is made by a related party, affiliate or subordinate of the Landlord (the “Affiliate”), the purchase may only be made with the prior written authorization of the Tenant, and the Landlord shall guarantee the assignment of the Contract to the Affiliate on the same terms and conditions set forth in the Contract.

Paragraph. In the event that the Tenant expresses an interest in the terms set forth in this Provision, the procedure set forth in Clause Twenty-Four of this Agreement shall be followed for purposes of carrying out the corresponding Appraisal and Transfer process.

Twenty-Fourth Provision– Purchase Option. The Tenant with a Purchase Option shall have the option to purchase the total or partial areas delivered by means of the minutes or the Leased Property (the "Purchase Option"), for himself, or for the third parties indicated by him, the Purchase Option shall be governed by the rules as follows:
i.
The purchase and sale price shall be that agreed upon by the parties based on the corporate appraisal carried out by the Lonja de Propiedad Raíz of Bogotá, which shall be contracted by the Tenant with an Option to Purchase within six (6) months following the Starting Date, and shall be indexed to the date on which the notification of the intention to purchase the Property is made, increasing in a proportional manner equal to that of the Consumer Price Index.


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This appraisal shall become an integral part of this Agreement and shall be included in Exhibit No. 4.

ii.
The Purchase Option may be exercised in whole or in part by the Tenant with the Purchase Option at any time during the Term of the Contract contemplated in the Fourth Provision of this Agreement, excluding its extensions (the "Term of effectiveness of the Option").

iii.
The Tenant with an Option to Purchase, at any time during the Term of Effectiveness of the Option to Purchase, must communicate in writing to the Landlord with an Option to sale, the will to exercise the Option to Purchase, indicating in such communication the documents required for the performance of due diligence on the Leased Property (the "Due Diligence Documents"), which will be, but not limited to, registered public deeds on the Property, proof of payment of trade taxes, building permits, information on disputes, precautionary measures, liens or encumbrances on the Leased Property, among other documents of a similar nature.
iv.
The Landlord shall, within ten (10) business days of receiving the notice, forward the Due Diligence Documents to the Tenant. Once the Due Diligence Documents have been received, the Tenant shall have a term of fifteen (15) business days to carry out the due diligence process of the Properties.

v.
Once the legal due diligence process of the Properties has been satisfactorily completed, at the discretion of the Tenant with Purchase Option, the Parties, within fifteen (15) business days following the expiration of the period for carrying out the due diligence process, shall sign the promissory Sale and Purchase Agreement in which the price, the method of payment of the Sale and Purchase Price, and other conditions for executing the purchase and sale agreement on the Properties shall be specified.

vi.
With a prior written agreement, the Parties may grant the public deed of sale and Purchase or the document by means of which the sale of the Properties is understood to be executed, without the need to exhaust the subscription stage of the Promissory Sale and Purchase Agreement.

The Landlord with Sale Option shall be obliged to sell to the Tenant with Purchase Option, the property of the Area object of the present Agreement, in case he notifies his/her intention to make this purchase. For these purposes, the Tenant with a Purchase Option may communicate this decision, at the latest, one month before the maximum date foreseen for the duration of this Agreement.

Paragraph. In the event of an offer from a third party, the price may not be lower than the price being offered by the third party in order to meet the purchase option.

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Twenty-fifth Provision– Encumbrance Settlement.  The Landlord must communicate to the Tenant, within fifteen (15) business days following the Start Date, the value of the debt corresponding to the Open Mortgage that corresponds to the Property, and which is recorded in notation 018 of the Property Registration Number folio. The Landlord with Sale Option must pay this debt, within the following 2 months from the Starting Date.

Twenty-sixth Provision – Payment of the credit and acquisition of the property. Notwithstanding the provisions of Provision Twenty-Four of this Agreement, and subject to prior agreement between the parties, the Tenant with an Option to Purchase, may acquire all or part of it in his/her own name, or in the name of the third party indicated by the latter, within 3 months after obtaining the results of both the title research study described in Provision Twenty-First and the appraisal referred to in Provision Twenty-Four of this Agreement, a percentage of the property or the number of hectares of the Property, at his/her option, paying directly to the creditor the debt corresponding to the encumbrance referred to in Paragraph Twenty-Six of this Agreement. The estimation of the percentage of property or of the hectares that may be acquired by this means shall be In the event that the Tenant with an Option to Purchase decides to make use of this power, the parties shall agree on the terms of business and formalization. Once the particular terms have been agreed between the parties, they must sign the purchase and sale agreement, in which the other conditions for perfecting the Purchase and Sale Agreement on the Property will be specified.

The acquisition of a percentage of the property or an amount of hectares of the Property will results in an automatic reduction of the fee, in the same proportion. This shall be reflected in the following invoice provided by the Landlord.

Twenty-seventh Provision - Notices. Any notice or other required or permitted communication under this Agreement must be in writing and must be personally delivered or transmitted by fax or electronic mail or sent by courier to the specified counterparty at the following address:

Landlord with Sale Option: Calle 5 No 38 - 25   office 416 Building Plaza San Fernando, Cali, Valle.
Email: palagua2004@gmail.com

Tenant with Purchase Option: Carrera 25 No 29-87 Local 17, Floridablanca, Santander.
Email: director@cosechemosya.co


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Either Party may change their address for the purposes of this Agreement by informing the new address by written notice to the other Party in the manner aforementioned. Any notice given pursuant to the foregoing shall be deemed to be delivered upon personal delivery, if so sent, upon receipt of confirmation, if sent by fax or e-mail, or on the 5th day of dispatch by specialized mail or Courier, if sent by mail, but if delivered in a manner different from that set forth above, such notice shall be deemed to be delivered when it is effectedly received.

In the case of receiving two (2) or more adversarial notices, the one with the most recent date will always prevail.

Twenty-eighth Provision – Amendment. This instrument contains the entire agreement between the Parties regarding the subject matter hereof, and supersedes any other agreement or negotiation, written or oral, which the parties may have celebrated prior to this contract. No amendment to the Agreement shall be deemed effective unless agreed to in writing.

Likewise, any amendment to the provisions of this instrument must be included in writing and duly signed by the authorized representatives of the Parties, without any Party being able to invoke any agreement or oral commitment of any kind that modifies, extends or renews the terms and content of the provisions of this agreement.

Twenty-ninth Provision – Expenses. Any expenses incurred in the celebration of this Agreement shall be borne by the Parties in equal proportions.

Thirtieth Provision – Exhibits.

No.
Description
Exhibit 1
Landlord Legal Representation Instruments.

Exhibit 2
Tenant Legal Representation Instruments.

Exhibit 3
Restrictions acknowledgment: Public Deed No. 1644 of the 4th of June of 1990, granted through the 2nd (second) Notary of Armenia.

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Exhibit 4
Corporate appraisal carried out by the Lonja de Propiedad Raíz of Bogotá.
Exhibit 5
Title research study.


For the record, this document is signed by the Parties in the city of Bogotá, D.C. on the twenty-seventh (27th) day of December 2018.


/s/Margarita Maria Mendez Caicedo
VICALVARO C.V.
Margarita María Méndez Caicedo
ID No. 1.130.667.987


/s/Oscar Mauricio Franco Ulloa
COSECHEMOS YA S.A.S.,
Oscar Mauricio Franco Ulloa
ID No. 79.596.227

LEASE AGREEMENT OF LAND LOT "CANTALAVIEJA" IN THE MUNICIPALITY OF GIRON - SANTANDER

Among those who sign this document, on one hand Oscar Mauricio Franco Ulloa identified with ID card C.c. No. 79.596.227 as legal representative of COSECHEMOS YA S.A.S. with TIN 900.969.918-1, domiciled in the city of Bucaramanga, who for the purposes of this contract will be called THE LESSEE; and on the other hand Guillermo Ramírez Cabrales identified with ID card C.c. No. 5.764.410 as legal representative of C.l GRAMALUZ S.C.A. with TIN 804,017,745-1, domiciled in Bucaramanga, who for the purposes of this contract will be called THE LESSOR, we have agreed to enter into a lease agreement that will be governed by the following clauses:

First. Subject.-Under this contract, the LESSOR gives the LESSEE a lease, granting its use and enjoyment of the land lot of 361 Hectares 6057 square meters along with the house of built area, called “CANTALAVIEJA” with Registration Number 300-193758 located in the department of Santander, of the Municipality of Girón, in the Motoso village, the lot includes three houses for the use of tenants and operators. It also has two nurseries, these nurseries will be expressly destined to the cultivation of cannabis, It also includes a space that is attached to the nurseries that will be used for the administration, warehouse, storage and operations of this activity.

Second. Value of the lease. The value of the lease is fixed in the sum of TWELVE MILLION PESOS Monthly (COP $12,000,000), sum that will be payable in advance at the lessor's address, who is obliged to extend receipt for the corresponding payment.

Third. Duration of the contract.- The duration of this contract will be of 6 YEARS, once it expires it will be automatically and successively extended for periods equal to the one initially agreed, if neither party communicates in writing to the other its intention not to extend the contract, with at least one month before the expiration of the initial term or its extensions.

Fourth. State of the goods.-THE LESSOR will deliver the goods in perfect operating and performance conditions, including a drinking water spot, energy spot and the battery of bathrooms for human use, by virtue of which the LESSEE will issue written proof of such circumstance. The transport of the goods will be the responsibility of the LESSEE, and might be carried out by THE LESSOR but it will be on its behalf.

Fifth. Maintenance of the goods.- The technical maintenance of the goods, as well as the necessary repair or replacement of pieces for their normal functioning, will be responsibility of the LESSOR, and will be able to perform them directly or through third parties previously authorized for this purpose.

Sixth. Liabilities of the lessee.- The following will be special liabilities of the lessee: a) Refrain from assigning this contract, or sublet it fully or partially; b) Do not change the location of the goods stipulated in this contract, without the prior written consent of the LESSOR; c) Do not modify the nature or technical specifications of the goods, and d) Inform the LESSOR immediately about any circumstance that threatens to violate the rights of the LESSOR on the goods, as well as any disturbance on the normal development of the contract.

Seventh. Reasons for contract termination.- The following will be reasons for contract termination, in addition to those legally contemplated: a) Nonperformance to comply with one or more of the liabilities derived generically or specifically from this contract; b) The initiation of the mandatory liquidation process of the LESSEE. Paragraph: if the LESSEE breaches, the lessor is empowered to interrupt the execution of the contract, declare the termination of the contract and demand the restitution of the goods, without the need for judicial or extrajudicial requirements of any kind.

Eighth. Restitution of the goods.- Once the contract is over, regardless of the cause, is mandatory that the LESSEE provides to the LESSOR the goods in perfect condition of operation and conservation, within two days after the termination of the contract.

Ninth. Penalty clause.- If any of the parties breaches with any of the obligations under its charge, the sum of twenty million pesos (COP $ 20,000,000) must be paid to the other party as a penalty derived from the said breach.

Tenth. Arbitration clause.- Any dispute or difference relating to this contract, its execution and liquidation, will be resolved by an arbitration tribunal appointed by the Board of Directors of the Chamber of Commerce of Bucaramanga, through a raffle made between the arbitrators inscribed on the lists that the commercial arbitration and conciliation center of said chamber carry. The tribunal shall be subject to the provisions of the Decree 1818 of 1998 or organic statute of alternative dispute resolution systems and other concordant regulations, according to the following rules: a). The tribunal will consist of three arbitrators. b) The internal organization of the tribunal will be subject to the rules set forth in the commercial arbitration and conciliation center. c) The tribunal will decide in (law, in conscience or in technical principles). d) The tribunal will operate in the commercial arbitration and conciliation center. As a sign of conformity, the parties sign this document in two copies of the same counterpart, in Bucaramanga on the two (2) days of the month of May, two thousand and eighteen (2018).

/s/Guillermo Ramirez Cabrales
LESSOR
Guillermo Ramírez Cabrales
ID card c.c. 5.764.410
Legal Representative
C.I. GRAMALUZ S.C.A.

/s/Oscar Mauricio Franco Ulloa
LESSEE
Oscar Mauricio Franco Ulloa
ID card c.c. 79.596.227
Legal Representative
COSECHEMOS YA S.A.S.

AMENDMENT TO THE PROMISSORY LEASE AGREEMENT
Among the undersigned, namely:


(i) C.I GRAMALUZ S.C.A identified with NIT NUMBER 804.017.745-1, legally represented in this act by GUILLERMO RAMIREZ CABRALES, of legal age, holder of Colombian Identification No. 5.764.410 of Socorro, who serves in this act in her capacity as legal representative, as evidenced by the Certificate of Incorporation and Legal Representation issued by the Chamber of Commerce of Bucaramanga acting as Exhibit No. 1 (the Landlord”) and, on the other hand,

(ii)    COSECHEMOS YA S.A.S., identified with NIT NUMBER 900.969.918-1, legally represented in this act by OSCAR MAURICIO FRANCO ULLOA, of legal age, holder of Colombian Identification No. 79.596.227, who serves in this act in his capacity as legal representative, as stated in the Certificate of Incorporation and Legal Representation issued by the Chamber of Commerce of Bucaramanga, acting as Exhibit No.2 (the “Tenant”).

The Landlord the Tenant (hereinafter individually referred to as the “Party” and collectively referred to as the “Parties”), have agreed to celebrate into an amendment to the promissory lease agreement (hereinafter the “Agreement”) that shall be ruled in accordance with teh applicable legal rules and, in particular, by the following clauses and prior to the following:



CONSIDERATIONS:
 
1.
That on the second of May of 2018, the Parties have celebrated a lease (the Agreement) on 361 hectares with 6,057 square meters (the “Area”) of the property located in the village of Motoso, rural area of the municipality of Girón, Santander, identified with the real estate registration No. 300-193758 of the County Recorder´s Office of Bucaramanga and the cadastral certificate No.000000110076000 the (“Property”). The current amendment aims to clarify that any requirement or environmental regulation present on zones required by the environmental authority shall be respected and/or compensated, serving this as an explicit authorization utilizing this document, to the owner to cede and deed these strips of land in favor of the environmental entity. This shall not deteriorate the value of the lease.

2.
That under the Agreement, the Tenant shall destine the Property to labors related to cannabis cultivation with medicinal and scientific purposes and other activities of production and transformation associated to these and activities included within its business purpose.

3.
That the Parties have been engaged in negotiations and to reflect the agreements outlined in the Agreement, have decided to subscribe the present Amendment, which leads to the entire replacement of the points contained in the Agreement, which shall remain as:

4.
The Tenant has full knowledge that as of October of 2018, the property subject of this contract has had a lien by an embargo process with Bancolombia.

5.
The Tenant has full knowledge of the condition of the property, and its access roads and its internal building roads.

6.
The Tenant has full knowledge of the condition of the property, and its access roads and its internal building roads.

7.
COSECHEMOS YA SAS, has full knowledge of the existence of a pineapple crop that occupies approximately 20 hectares of the farm Cantalavieja, it is estimated that the pineapple harvest comes out once a year. CI GRAMALUZ SCA shall indemnify COSECHEMOS YA SAS, against any possible claim arising from this crop.

8.
COSECHEMOS YA SAS, has full knowledge that on the Cantalavieja farm, there are two (2) portions of land leased for the installation of two (2) antennas of the companies Sistelec, one of them works for meteorological analysis and Genesis Data. For internet purposes, CI GRAMALUZ SCA shall hold Cosechemos Ya SAS compensated from any third party claims that may arise from the existence of the mentioned antennas.


PROVISIONS


First Provision - Purpose. Under this Agreement, the Landlord promises to deliver the tenancy, as a lease to the Tenant, who in turn promises to receive the same title for their use and enjoyment, in relation to a land of approximately 361 hectares with 6,057 square meters 1,432 hectares, (the “Area”), which is located within the property in the village Motoso, rural area of the municipality of Girón, Santander, identified with the real estate registration No. 300193758 of the County Recorder´s Office of Puerto Bucaramanga and the cadastral certificate No. 000000110076000. The property is described and determined according to the sides taken from public Deed No, 0459 of the 1st of February of 2008, granted by the second (3rd) Notary of Bucaramanga (the “Property”), which are in Annex No. 3 of the present Agreement. The current amendment aims to clarify that any requirement or environmental regulation present on zones required by the environmental authority shall be respected and/or compensated, serving this as an explicit authorization by means of this document, to the owner to cede and deed these strips of land in favor of the environmental entity. This shall not deteriorate the value of the lease.

Second Provision - Destination. The Tenant is obliged to destine the Area for labors related to its business purpose, in accordance with the Certificate of Incorporation and Legal Representation issued by the Chamber of Commerce of Bucaramanga and specifically, nonetheless not being limited to: the development of agricultural and/or agro-industrial, medicinal and scientific activities, especially but nonetheless not being limited to the manufacture of cannabis derivatives for national use and scientific research, manufacture for exporting, cultivation of cannabis for medicinal and scientific purposes, of seeds for planting and the cultivation of cannabis plants, for medicinal, scientific and industrial uses and research, including the storage of inputs, derivate products, by-products, raw materials and other forms of licenses that are allowed to the Tenant in accordance with the current legislations and the competent Colombian authorities, including Law 1787 of 2016, Decree 613 of 2017 and Resolution 780 of 2016, Resolution 2891 of 2017 and Resolution 2898 of 2017 issued by the Ministry of Health and Social Protection, Resolution 3168 of 2015 issued by the Colombian Agricultural Institute, and other regulations currently in force issued by the competent authorities and those issued after the signing of the present document.

Paragraph. By virtue of this Agreement, the Landlord, as owner of the Property, expressly authorizes the Tenant, to make use of the Area for the implementation, development and cultivation of cannabis plants for medicinal and scientific uses as well as other agricultural and/or agro-industrial purposes directly or indirectly related to said activities, in accordance with the provision of the licenses granted by the competent authorities to the Tenant, including the production of seeds authorized or registered within the Colombian Agricultural Institute which are annexed to the present Agreement.

Third Provision - Price. The value of the Area´s monthly rental fee (the “Fee) shall be:


(a) 
Ten million Colombian pesos (COP $10.000.000) plus VAT, which shall be in force from September 19th, 2019 until February 29th, 2020.

(b) 
Twenty million Colombian pesos (COP $20.000.000) plus VAT, which shall be in force from March 1st, 2020. Upon expiration of the first year of the Agreement, the Fee shall be increased automatically without the need for any requirement between the Parties, in a proportion equal to the consumer Price index (CPI) increase, this being certified by the DANE for the 12 months immediately prior to the date in which readjustments are to be made.

The Tenant is obliged to top at the Fee within ten (10) business days following the date of receipt of the invoice sent by the Landlord, as referred to in the first paragraph of this clause.

First Paragraph. Invoice Radication. The Landlord shall file a monthly electronic invoice for the fee's collection at the following e-mail address: cosechemosya@gmail.com dlopez@fmresources.ca, within the first five (5) business of each month.

Second Paragraph. Form of Payment. The Tenant shall pay the Fee in favor of CI GRAMALUZ SCA, in the current account No. 487-00555-5 of the ITAU Bank. The bank account change to make effective the fee consignation shall be informed utilizing notification.

Third Paragraph. Grace period. The Landlord shall grant in favor of the Tenant a grace period until the thirty-first of August of two-thousand-nineteen (2019), period in which the fee shall not be caused in favor of the Landlord, nonetheless the mentioned Party shall be held responsible for the payment of the corresponding public services, as well as the agreement that the first rent will accrue from September 1st, 2019, date from which the Landlord shall have five (5) business days to file the first invoice.

Fourth Provision – Duration of the Agreement. The present Agreement shall have an initial duration of five (5) years, as of the 1st OF SEPTEMBER OF 2019.

Sixth Provision – Delivery. The Landlord delivered the Area to the Tenant on May 2nd, 2018, along with all its annexes, improvements, uses, and customs, without prejudice to the grace period that may have been agreed upon by the parties provided in the fourth Paragraph of the Third Provision. In the state in which the Tenant received it.



Seventh Provision – Obligations of the Landlord. The following are the stipulated obligations of the Landlord, without prejudice to those imposed by law:

(a)
To allow the peaceful use and enjoyment of the Area.

(b)
To release the Tenant from any disturbance in the normal and full enjoyment of the Area.

(c)
To receive the payment of the fee.

(d)
To file the corresponding invoice to the collection of the fees within the first 5 business days of each month.
 
(e)
To assume the payment of the Property´s tax obligations, specifically those that correspond to property taxes, valuation contributions, and overall, any tax or tribute levied on the Property, for which the Tenant may demand verification of said payments under the applicable legislation.

(f)
To allow the Tenant, with prior express written authorization, to make improvements and adjustments in the Area for its adaptation and use, under the Agreement Provisions. To allow the Tenant to make improvements and adaptations in the Area for its use under the provisions determined in the Agreement, said expenses should fall under the Tenant responsibility, and if the withdrawing of the improvements causes any deterioration to the Property, these shall not be withdrawn. The tenant shall not intervene in any way among the areas currently purposed for pineapple, avocado, lemon, and tangerine harvests. The Tenant shall respect these areas with their respective crops. Said areas may be intervened after previous stipulated agreements with the Landlord.

(g)
To carry out all the necessary acts for the Tenant to have a peaceful tenancy of the Property.

(h)
To receive the Area upon termination of the Agreement, as determined in the mentioned.

(i)
To notify the Tenant before entering into any legal business involving the Property.

(j)
 All other law provisions as well as those stipulated on this Agreement.


Eighth Provision – Obligations of the Landlord. The following are the stipulated obligations of the Tenant, without prejudice to those imposed by law:

(a)
To pay the Fee under the provisions of this Agreement.

(b)
To use and enjoy the Area under this Agreement, showing respect to the areas with current pineapple, lemon, tangerine and avocado harvests.

(c)
To restitute the property and/or Areas at the termination of the Agreement.

(d)
To maintain good relations, peaceful and respectful coexistence with the personnel and other people who are in the Cantalavieja estate.

(e)
To comply with the farm’s biosecurity standards.

(f)
To pay for the respective public services of the farm.

(g)
To provide the Landlord with copies of the licenses permits and other required authorizations by different entities regarding the development of the business purpose activity carried out on the leased property.

(h)
To watch over and care for the conservation and security of the farm and of those who are on it.

(i)
The Tenant shall be liable for all provisions assumed on this Agreement, as well as those imposed by the applicable law, not being limited to the agreed initial term but also during tacit carryovers and written renewals, until the date of restitution of the property to the Landlord. It shall not keep or allow the storage within the Property of explosive substances or those detrimental to safety, conservation, and hygiene, as well as those that in any way may be qualified as illicit.

(j)
All other law provisions as well as those stipulated on this Agreement.


Ninth Provision - Sanitation. The Tenant undertakes to go out to the Tenant’s sanitation in the events of encumbrances and redhibitory vices that affect the agreed use of the Area.

Tenth Provision – Local Repairs. The Tenant shall be in charge of carrying out the local repairs in the Area under the terms of article 1985 of the Colombian Civil Code.

Eleventh Clause – Public Services. From commencement and up to the restitution date, the Tenant shall be obliged to pay for the public services regarding energy, telephone lines, aqueduct, and sewerage, and garbage collection. If, as a consequence of not timely payment of public services, the respective companies suspend them, withdraw the meter or telephone lines, the Tenant shall charged with the late payment penalties interests, penalties, and expenses that demand reconnection. The Tenant may, without any limitation, install its telephone line(s), power transformers, and water suction pumps, which may be withdrawn upon the termination of the Agreement.

Paragraph. The Landlord shall cooperate as the owner of the Property through authorizations to carry out the claims and formalities required for restoring the service or adequately provided by the respective companies.

Twelfth Provision – Lease Transfer. The assignment of the contractual position of either of the parties or any of the rights arising from the present Agreement shall require the express, prior and written consent of the other Party.

Thirteenth Provision - Sublease. In the event that the Tenant tends to sublet partially or wholly the Area to a third party other than those mentioned above, it shall be done under the provisions of article 523 of the Commercial Code.
 
Fourteenth Provision – Area Restitution. For the restitution of the Area, once the Agreement is terminated or any of its extensions or carryovers, the Landlord shall send a written notice to the Tenant specifying the date and time for its delivery. The Tenant shall place the Area at the disposal of the Landlord, in the condition in which it was received, with no wear and tear other than the normal due to its use, it shall be free of all occupants in any capacity and the keys shall be handed over along with receipts proof of the payment of public services, until the last day on which the Area was physically occupied, on the business day following the expiration of the respective period. Any improvement introduced by the Tenant may, at his sole discretion, be withdrawn, or maybe left to the benefit of the Area, in which case it shall not be entitled to any consideration for such improvements. The expenses incurred by the Tenant that were originated as a result of or on the occasion of the restitution of the Area, shall be of its exclusive charge and cost.

If the Landlord does not notify the date and time of delivery of the Area within five (5) calendar days following the effective termination of the Agreement, the Tenant shall be responsible for sending notice to the Landlord indicating said time.

If the Landlord fails to return the Area on the stipulated date by the Tenant or refuses to receive, such circumstance shall be recorded in the restitution act. In this case, the Tenant shall provisionally deliver the Area under Article 24 of Law 820 of 2003.

Fifteenth – Agreement Termination. The Parties may terminate the present Agreement without being subject of any indemnity, when any of the following events occurs, in addition to those established by this Agreement and imposed by Law:

(a)
Termination by either Party

i.
Damage or destruction of the Area and/or Property, when said damage or destruction is of such magnitude as to prevent the normal use and enjoyment of the Tenant.
ii.
By dissolution or declaration of compulsory liquidation of any of the Parties.
iii.
By judicial conviction or inclusion of the Parties and/or any of their administrators in the Specially Designated Nationals and Blocked Persons List, issued by the Office of Foreign Assets Control of the United States Department of Treasury (“OFAC”) and/or in any similar list issued by the OFAC or any similar entity, in accordance with any authorization, executive order or regulation.
iv.
The expiry of the term of the Agreement, its carryovers, or renewals.
v.
The mutual agreement between the Parties, which must be in written form.
vi.
The breach of any of the provisions set forth in the present Agreement.


(b)
Termination by the Tenant

i.
The impossibility of using the Area for the purposes agreed upon this Agreement, due to the urban planning and use regulations in force or that shall be governed in the future by judicial rulings, administrative or policy decisions that so order.
ii.
By revocation, denial, or termination of the required licenses or permits for the operation of the activities to which the Area shall be assigned.
iii.
If the Tenant fails to make the necessary repairs to the purpose of this Agreement, and this failure causes damage to the Landlord.

(c)
Termination by the Landlord

i.
By failure or delay greater than four (4) consecutive months in the payment of the established Fee.
ii.
If the Tenant destines the Area to a different purpose other than the one established in the present Agreement.

Sixteenth Provision – Early Termination. In the event that the Tenant terminates this agreement in advance and without just cause and at any time, he shall give six (6) months’ notice prior to the effective date intended as termination of the Agreement and shall be obliged only to pay to the Landlord, an amount of money equivalent to two current fees at the date of termination. Paragraph: If the Tenant early terminates the Agreement on the terms outlined in this Provision, there shall be no application of the Penalty Provision or collection of any additional sums on any title.

Seventeenth Provision – Penalty Provision. The gross breach of the obligations outlined in this Agreement for the Parties shall give rise to the payment of a penalty equivalent to three leasing fees.

The Parties recognize the executive merit of this provision to enforceably collect any sum of money owed by the non-performing Party to the performing Party in connection with the object and obligations of the Agreement.



It shall be understood in any case, that the Penal Provision is of a sanctioning nature, wherefore, this Provision does not extinguish the obligation to comply with any of the obligations agreed in this Agreement, and it shall not make it impossible for the affected Party, in the event of a breach, to request the damages caused by the same, that is to say, the Party that has fulfilled its obligations may request both the payment of the penalty and the compensation for the pertinent damages, including, among others, the payment of the lease fees that are missing until the termination date of the Agreement or its extensions or renewals agreed in Fifth Provision of this Agreement, for the value that would correspond to the sowing of half of the hectares that make up the Area. The Parties expressly waive any private or judicial requirement to constitute arrears in the payment of this or any other obligation arising under the Agreement.

Paragraph. The breach referred to in this Provision must be classified, that is to say, gross and preventing the performance of the Agreement or making its performance more onerous or difficult. The Performing Party shall classify the severity of the breach.

Eighteenth Provision– Statements and warranties. The Landlord represents and warrants to the Tenant:

(a) 
That he is a legal entity legally established under the laws of the Republic of Colombia.

(b) 
That, for the celebration and the fulfillment of this Agreement, they have all the corporate and legal authorizations and faculties and have taken all the necessary corporate actions, including the authorizations of the respective corporate bodies, to be able to celebrate and perform this Agreement.

(c) 
That the effectiveness, enforceability, subscription, celebration, and/or performance of this Agreement does not require the granting of approval, consent, permission, order, license, authorization, declaration, presentation, or report from any person.

(d) 
That the information provided to the Tenant is truthful, complete, accurate, up to date, verifiable, and comprehensible. Likewise, the information to be provided to the Tenant in the performance of the Contract shall be truthful, complete, accurate, up to date, verifiable and comprehensible.

(e) 
That the Contract has been duly celebrated and subscribed and constitutes a source of legal, valid, binding and enforceable obligations under its regulations.

(f) 
That, in addition to the executive attachment that falls on the Property, and which is recorded in notation 008 of the ninth (9) of October 2018 of the property registration number folio, to date he/she is not aware of any situation that limits or threatens to limit or restrict the use, enjoyment and disposition of the Property or the Area, including threats of a civil nature to the ownership, possession or free disposition, nor has he/she been notified of or identified any circumstance of a regulatory, urban, environmental or health nature that could affect the development of the object of this Agreement.

(g) 
That the Property, at the date of subscription of this Agreement, is up to date in the payment of all taxes such as property tax, valuation charge, and in general, other concepts related to the maintenance of the Property.

(h) 
That he/she is solely and exclusively responsible for any possible complaint regarding the right to and/or ownership of the Property, in this sense, it releases in a long-term the Tenant from all liability for judicial and / or extrajudicial complaints that may arise against the Tenant.


Nineteenth Provision – Indemnity. The Landlord shall indemnify the Tenant from and against any action, complaint, suit, loss, liability, damage, costs and/or expenses that the Tenant may suffer as a result of any breach of any nature of the obligations under this Agreement, or any judicial or extrajudicial claim by reason of acts or obligations that are his/her responsibility under this Agreement or relating to the Property. Especially regarding the process by which executive attachment was decreed as a precautionary measure that falls on the property, and which is recorded in notation 008 of the ninth (9) of October 2018 of the property registration number folio. Likewise, the landlord shall be indemnified by the tenant for and against any action, complaint, suit, loss, liability, damage, costs and/or expenses that may be suffered as a result of the execution of their activities in this lease contract.

First Paragraph. The Landlord agrees to defend the Tenant from all claims, judicial or extrajudicial, for the preceding reasons, arising out of the performance of this Agreement and to acknowledge the costs associated with such defense, including attorneys' fees.

Twentieth Provision – Authorization for the execution of future legal transactions. The Tenant to celebrate legal transactions involving the property, such as, but not limited to, constituting a guarantee, entering into purchase and sale agreements or purchase and sale promissory agreements, entering into new lease agreements, or subjecting the Property to easements.

Twentieth First Provision – Condition Subsequent. The Tenant must sign and submit to the Landlord a title research study on the Property within three months of the Start Date. If this study is unfavorable, the Tenant may terminate the Agreement, without there being any payment in favor of the Landlord.

The title research study shall constitute an integral part of this Agreement and shall be included in Exhibit No. 5.

Twenty-second Provision- Abandonment. In the event of a proven and total abandonment of the Area for more than sixty (60) business days, the Tenant expressly authorizes the Landlord to enter the Area and recover his/her custody, with the only requirement of the presence of two (2) witnesses, in an attempt to avoid the deterioration or dismantling of the Area, provided that the Area remains abandoned or uninhabited for the same term, and that the exposure to the risk resulting from the abandonment is such that it threatens the physical integrity of the property or the security of the neighborhood.

Twenty-third Provision- Preemptive Right. The Landlord shall grant the Tenant a preemptive right over the Property and/or Area, which shall be executed under the provisions of this provision, during the term of this Agreement and its extensions. In the event that the Landlord receives a formal offer to purchase from a third party other than a related party, affiliate or subordinate of the Landlord involving the Area, and that the Landlord has an interest in accepting, he/she shall notify the Tenant in writing of the conditions offered by the interested third party.


The Tenant shall have a period of fifteen (15) business days from the date of receipt of the written notice by the Landlord to express its interest by written notice. If the Tenant does not express his/her interest or his/her response is negative, the Landlord may freely celebrate the purchase and sale agreement with the interested third party under the same conditions offered to the Tenant. If the sale and purchase with the third party fail, the preemptive right shall remain effective. If a third party acquires the Property and/or the Area, the Landlord must guarantee that the latter will accept and respect the Contract.

In the event that the formal purchase offer is made by a related party, affiliate or subordinate of the Landlord (the "Affiliate"), the purchase may only be made with the prior written authorization of the Tenant, and the Landlord shall guarantee the assignment of the Contract to the Affiliate on the same terms and conditions set forth in the Contract.

Without prejudice to the foregoing, the Landlord must obtain the authorization referred to in Clause Twentieth of this Agreement to enter into sales contracts with third parties.

 Paragraph. If the Tenant expresses an interest in the terms outlined in this Provision, the procedure outlined in Clause Twenty-Four of this Agreement shall be followed for purposes of carrying out the corresponding Appraisal and Transfer process.

Twenty-Fourth Provision– Purchase Option. The Tenant shall have the option to purchase the Leased Property (the "Purchase Option"), for himself, or the third parties indicated by him, the Purchase Option shall be governed by the rules as follows:
i.
The purchase and sale price shall be that agreed-upon corporate appraisal carried out by the Lonja de Propiedad Raíz of Bogotá, which shall be contracted by the Tenant within six (6) months following the Starting Date, and shall be indexed to the date on which the notification of the intention to purchase the Property is made, increasing in a proportional manner equal to that of the Consumer Price Index.

This appraisal shall become an integral part of this Agreement and shall be included in Exhibit No. 4.

ii.
The Purchase Option may be exercised in whole by the Tenant, at any time during the Term of the Contract, contemplated in the Fourth Provision of this Agreement, excluding its extensions (the "Term of the effectiveness of the Option ").

iii.
The Tenant, at any time during the Term of Effectiveness of the Option to Purchase, must communicate in writing to the Landlord, the will to exercise the Option to Purchase, indicating in such communication the documents required for the performance of due diligence on the Leased Property (the "Due Diligence Documents"), which will be, but not limited to, registered public deeds on the Property, proof of payment of trade taxes, building permits, information on disputes, precautionary measures, liens or encumbrances on the Leased Property, among other documents of a similar nature.

iv.
The Landlord shall, within thirty (30) business days of receiving the notice, forward the Due Diligence Documents to the Tenant. Once the Due Diligence Documents have been received, the Tenant shall have a term of sixty (60) business days to carry out the due diligence process of the Property.



v.
Once the legal, due diligence process of the Properties has been satisfactorily completed, at the discretion of the Tenant, the Parties, within fifteen (15) business days following the expiration of the period for carrying out the due diligence process, shall sign the promissory Sale and Purchase Agreement in which the method of payment of the Sale and Purchase Price, and other conditions for executing the purchase and sale agreement on the Property shall be specified.

vi.
With a prior written agreement, the Parties may grant the public deed of sale and Purchase or the document through which the sale of the Properties is understood to be executed, without the need to exhaust the subscription stage of the Promissory Sale and Purchase Agreement.

The Landlord shall be obliged to sell to the Tenant, the total property of the Area object of the present Agreement, in case he notifies his/her intention to make this purchase. For these purposes, the Tenant may communicate this decision, at the latest, one month before the maximum date foreseen for the duration of this Agreement.

Twenty-fifth Provision– Encumbrance Settlement.  The Landlord must communicate to the Tenant, within fifteen (15) business days following the Start Date, the value of the debt corresponding to the Executive Attachment decreed as a precautionary measure that falls on the property, and which is recorded in notation 008 of the ninth (9) of October 2018 of the property registration number folio. The Landlord must pay this debt, within the following 24 months from the Starting Date.

Twenty-sixth Provision – Payment of the credit. Without prejudice to the provisions of Clause Twenty-Fourth of this Agreement, within 12 months of obtaining the results of both the securities study described in Clause Twenty-First and the appraisal referred to in Clause Twenty-Four of this Agreement, the tenant shall be able to make the payment of the obligation that as guarantor the landlord currently has with Bancolombia, by means of a loan, granted to CI GRAMALUZ SCA, for a previously agreed value, which shall be backed by means of a mortgage in favor of the tenant and/or whoever this defines, in the meantime the tenant decides if he exercises his right to purchase option on the property object of this contract.

The interest generated by this loan shall be mutually agreed and said value may be discounted by the tenant from the value of the lease and in no case may it exceed the nominal interest established by the Banco de la República.

Twenty-seventh Provision - Notices. Any notice or other required or permitted communication under this Agreement must be in writing and must be personally delivered or transmitted by fax or electronic mail or sent by courier to the specified counterparty at the following address:

Landlord: CARRERA 35A NO. 46-04 BUCARAMANGA

Tenant: CARRERA 25 NO. 29-87 FLORIDABLANCA



Either Party may change their address for this Agreement by informing the new address by written notice to the other Party in the manner aforementioned. Any notice given pursuant to the foregoing shall be deemed to be delivered upon personal delivery, if so sent, upon receipt of confirmation, if sent by fax or e-mail, or on the 5th day of dispatch by specialized mail or Courier, if sent by mail, but if delivered in a manner different from that set forth above, such notice shall be deemed to be delivered when it is effectively received.

In the case of receiving two (2) or more adversarial notices, the one with the most recent date will always prevail.

Twenty-eighth Provision – Amendment. This instrument contains the entire agreement between the Parties regarding the subject matter hereof and supersedes any other agreement or negotiation, written or oral, which the parties may have celebrated before this contract. No amendment to the Agreement shall be deemed effective unless agreed to in writing.

Likewise, any amendment to the provisions of this instrument must be included in writing and duly signed by the authorized representatives of the Parties, without any Party being able to invoke any agreement or oral commitment of any kind that modifies, extends or renews the terms and content of the provisions of this agreement.

Twenty-ninth Provision – Expenses. The Parties shall bear any expenses incurred in the notarization of this Agreement in equal proportions.

Thirtieth Provision: Any controversy or difference related to this agreement to this agreement, its execution and liquidation will have to be solved by means of direct and cordial agreement between the parties, if after thirty (30) business days the difference persists, the parties will have to go to the Centro de conciliación empresarial de la superintendencia de sociedades de Bucaramanga.

Thirty-first Provision- Exhibits.

No.
Description
Exhibit 1
Landlord Legal Representation Instruments

Exhibit 2
Tenant Legal Representation Instruments

Exhibit 3
Area plan

Exhibit 4
Corporate appraisal carried out by the Lonja de Propiedad Raíz of Bogotá

Exhibit 5
Title research study



For the record, this document is signed by the Parties in the city of Bucaramanga on the first (01st) day of September 2019. (The “Date Signed”)

LANDLORD
 
TENANT
(signed) “Guillermo Ramirez Cabrales”
 
(signed) “Oscar Mauricio Franco”
CI GRAMALUZ SCA
 
COSECHEMOS YA
TIN 804.017.745-1
 
TIN 900.969.918-1,
GUILLERMO RAMIREZ CABRALES
 
OSCAR MAURICIO FRANCO
ID NO. 5.764.410
Legal Rep.
 
ID NO. 79.596.227
Legal Rep.
 



LOAN AGREEMENT

BETWEEN:

COPPER ONE INC., a corporation existing under the laws of Canada and having an office at 65 Queen Street West, Suite 800, Toronto, Ontario, M5H 2M5

(hereinafter called the “Company” or the “Lender”)

OF THE FIRST PART
- and -

FLORA GROWTH CORP., a corporation existing under the laws of the Province of Ontario and having an office at 65 Queen Street West, Suite 800, Toronto, Ontario, M5H 2M5

(hereinafter referred to as the “Borrower”)

OF THE SECOND PART


WHEREAS the Lender and the Borrower have agreed to enter into an arrangement whereby the Lender has agreed to lend and the Borrower has agreed to borrow up to USD$375,000 (the “Loan”) subject to the terms and conditions contained herein;

AND WHEREAS the Borrower requires the Loan on a short-term basis to cover working capital needs and for its operations in Colombia;

NOW THEREFORE in consideration of the mutual promises and covenants hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

1.
The Loan

The Lender hereby agrees to lend to the Borrower the principal sum of up to USD$375,000 in lawful money of the United States of America (the “Principal”). Interest shall be payable on the Principal that has been drawn by the Borrower, as well as interest on interest accrued and unpaid when due and shall be calculated and payable at a rate of 10.0% per annum (the “Interest Rate”) and in accordance with the terms of this Loan Agreement.  The Borrower directs the Lender to wire the Principal, or any portion thereof, to the following account:

[Banking information redacted]

2.
Repayment

The Borrower shall repay the Loan (the Principal that has been drawn on and accrued interest) in cash on demand by the Lender.  The Borrower and the Lender may negotiate repayment of the Loan via the transfer of securities or other investment products but any arrangement for repayment other than cash remains subject to a subsequent written agreement.


3.
Conditions of Advance

The Lender agrees to advance the Loan, in such installments as requested by the Borrower, in writing, promptly upon receiving such written request following the execution of this Agreement by the Lender, solely on the condition that the Loan is used by the Borrower towards working capital needs and its operations in Colombia.

4.
Waiver of Formalities

The Lender hereby waives presentment, notice of dishonour and protest.

5.
Waivers Generally

No waiver of any right or remedy of the Lender hereunder shall be effective unless in writing and signed by the Lender and any waiver granted by the Lender shall be effective only to the extent and in the circumstances specified therein.  No failure, delay or omission by the Lender to exercise or enforce any rights or remedies under this note or any security collateral hereto shall constitute a waiver thereof or of any other rights or remedies of the Lender.

6.
Assigns, Successors and Governing Law

This note shall not be assignable by the Borrower without the prior written consent of the Lender.  This note shall enure to the benefit of and be binding upon the respective successors of the Borrower and the Lender and the assigns of the Lender and the permitted assigns of the Borrower.  This note shall be governed by and construed in accordance with the laws of the Province of Ontario.

[signature page follows]



Dated as of August 6, 2019


COPPER ONE INC.


By: Deborah Battiston 
                        Authorized Signing Officer



FLORA GROWTH CORPORATION


By:Damian Lopez 
                        Authorized Signing Officer



SHAREHOLDERS’ AGREEMENT
THIS AGREEMENT made as of the 2nd day October, 2019 (the “Execution Date”).
A M O N G:
FLORA GROWTH CORP., a company duly incorporated pursuant to the laws of the Province of Ontario, whose registered office is at 65 Queen Street West, Toronto, ON  M5H 2M5
(“Flora”)
- and -
GUILLERMO ANDRES RAMIREZ MARTINEZ, an individual resident and domiciled in Carrera 35ª  no. 46-04 Bucaramanga Santander Colombia (037)6430024

(“Guillermo”)

- and -
GUILLERMO RAMIREZ CABRALES, an individual resident and domiciled in Carrera 35ª  no. 46-04 Bucaramanga Santander Colombia (037)6430024

(“Cabrales”)

- and -
OSCAR MAURICIO FRANCO ULLOA, an individual resident and domiciled in Vereda el Guamo, casa 8, Piedecuesta, Santander, Colombia

(“Oscar”)

WHEREAS Cosechemos Ya S.A.S. (the “Company”) is the legal and beneficial owner of a 100% undivided interest in a non-psychoactive cannabis licence in Colombia, as more specifically identified in Schedule “A” hereto (the “Property”);
AND WHEREAS Flora owns 4,500 shares in the capital of the Company (90% of the issued and outstanding share capital), Guillermo owns 63 shares in the capital of the Company (1.26% of the issued and outstanding share capital) Cabrales owns 187 shares in the capital of the Company (3.74% of the issued and outstanding share capital) and Oscar owns 250 shares in the capital of the Company (5% of the issued and outstanding);

-2-
AND WHEREAS Flora, Cabrales, Oscar and Guillermo are shareholders of the Company and seek to execute and deliver this Agreement in order to set out their respective rights and obligations with respect thereto;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants and agreements of the Parties hereinafter contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each Party), the Parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Defined Terms
In this Agreement, the following terms shall have the respective meanings set out below and grammatical variations of such terms shall have the corresponding meanings:

Advances” means shareholder loans made by Flora to the Company (or to the extent the Free Carry has terminated, any Shareholder) to fund the Company’s operations, which loans shall bear interest at an annual rate of interest equal to the Interest Rate;

Affiliate” means, with respect to any Person, any Person which directly or indirectly Controls, or is Controlled by, or is under common Control with, that Person;

Agreement” means this shareholders agreement, as it may be amended or supplemented from time to time in accordance with the terms hereof;

Appraiser” means the qualified appraiser licensed in Colombia, at arm’s length to the Shareholder appointing such appraiser and having a minimum of 10 years’ experience in business valuations;

Available Cash” means cash generated by the Company from operations, cash available from lenders, and cash available from other sources which, as determined by Flora, acting reasonably, can be prudently used for the payment of expenses without adversely affecting, to a material extent, ongoing Operations, the assets of the Company or the Company’s satisfaction of applicable Legal Requirements;

Average Fair Market Value” has the meaning set out in Section 7.4(a)

Bankruptcy Proceeding” means, in respect of any Person, to whom Canadian law is applicable ((a) through (e) or Colombia law (f)):
(a)
if a Person commits an act of bankruptcy or a petition or other process for the bankruptcy of the Person is filed or instituted and remains undismissed or unstayed for a period of 30 days or any of the relief sought in such proceeding (including the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur;
(b)
if any proposal is made or any petition is filed by or against the Person under any law having for its purpose the extension of time for payment, composition or compromise of the liabilities of the Person or other reorganization or arrangement respecting its liabilities and such proposal or petition is not stayed or dismissed within 20 days or if the Person gives notice of its intention to make or file any such proposal or petition including an application to any court to stay or suspend any proceedings of creditors pending the making or filing of any such proposal or petition;

-3-
(c)
if any receiver, administrator, or manager of the property, assets or undertaking of the Person or a substantial part thereof is appointed, whether privately, pursuant to any statute, or by or under any judgment or order of any court;
(d)
if any proceedings are taken to enforce any Encumbrance affecting the assets of the Person or if a distress or any similar process be levied or enforced against such assets and such proceedings are not dismissed or stayed within 20 days after the commencement thereof;
(e)
the making by the Person of a general assignment for the benefit of its creditors; or
(f)
with respect to a person to which Colombia laws apply, as provided for in the applicable provisions of the Colombian Commercial Code, in Law 1116 of 2006 and in law 1564 of 2012, regarding bankruptcy as well as in the Corporate Superintendency legal opinions regarding legal interpretations of these laws;
Board” means the board of directors of the Company;

Business Day” means a day, other than a Saturday, Sunday or holiday, on which commercial banks in Toronto, Canada and Bogota, Colombia are open for business;

Cabrales” has the meaning set out on page 1;

Chairman” means the chairman of the Board appointed hereunder;

Company” means Cosechemos Ya S.A.S., a company duly incorporated pursuant to the laws of Colombia;

Confidential Information” means the terms of this Agreement, all Technical Data and any other information and intellectual property concerning any matters affecting or relating to the business, Operations, assets, results or prospects of the Company, including information regarding plans, budgets, costs, processes, results of exploration, development and mining and other data, except to the extent that such information has already been publicly released by a Party as allowed herein or that the Party providing such information can demonstrate was previously publicly released by a Person who did not do so in violation or contravention of any duty or agreement;

Control” means possession, directly or indirectly, of the power to direct or cause the direction of management and policies through ownership of voting shares, interests or securities, or by contract, voting trust or otherwise; and “Controlled” and “Controlling” shall have corresponding meanings;

Costs” means the sum of all costs, expenses, charges and outlays, direct or indirect, incurred on or in respect of the License (or any other property of the Company), including without limitation, property tenure payments, good standing fees and penalties, land acquisition costs, payments to holders of surface rights, taxes (excluding value added and similar taxes which will be refunded to, or recouped by the Company), mapping, surveying, permitting, geochemical surveys, geophysical surveys, sampling, assaying, trenching, drilling, geochemical analyses, road building, drill site preparation, logistics, travel, compilation, data analysis, GIS and database, drafting, report writing, metallurgical testing, metallurgical and economic studies, preliminary economic assessment, employees, consultants, contractors, environmental studies, reclamation, all other project expenditures including any applicable operator’s fee.

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Defaulting Shareholder” has the meaning set out in Section 7.3(a);

Director” means a director of the Company;

Down Payment for Future Capitalization” means shareholder payments to be made by Flora to the Company (or to the extent the Free Carry has terminated, any Shareholder) to fund the Company’s operations;

Drag Along Right Offer to Purchase has the meaning set out in Section 5.4(a);

Drag Along Right Offeror has the meaning set out in Section 5.4(a);

Drag Along Right Purchase Price” has the meaning set out in Section 5.4(a);

Encumbrance” means any lien, charge, hypothec, pledge, mortgage, title retention agreement, covenant, condition, lease, license, security interest of any nature, claim, exception, reservation, easement, encroachment, right of occupation, right-of-way, right-of-entry, matter capable of registration against title, option, assignment, right of pre-emption, royalty, right, privilege or any other encumbrance or title defect of any nature whatsoever, regardless of form, whether or not registered or registrable and whether or not consensual or arising by any Legal Requirement, and includes any contract to create any of the foregoing;

Flora” has the meaning set out on page 1;

Force Majeure” means an event beyond the reasonable control of the applicable Party and not caused by such Party (but does not include a failure by a Party to fund) that prevents or delays it from conducting the activities and performing the obligations contemplated by this Agreement; provided that the affected Party makes a good faith effort to resolve or avoid such delay; such events shall include, but not be limited to, acts of God, war, insurrection, terrorism, riots, action or inaction of any Governmental Authorities, failure to obtain any Governmental Authorization, inability to obtain or delay in obtaining any environmental, operating or other permits or approvals, authorizations or consents, fire, strikes, lockouts or other industrial disturbances, non-availability of necessary materials, equipment or transportation, inclement weather conditions and interference by third party interest groups (including non-governmental organizations, environmental lobbyists, community groups or indigenous peoples’ groups);

Free Carry” has the meaning set out in Section 4.1;

Governmental Authority” means any governmental authority, including the governments of Ontario, Canada, Colombia, and any political subdivision of any of the foregoing, any multi-national organization or body comprised of one or more of the foregoing, any agency, department, commission, board, bureau, court or other authority thereof, or any quasi-governmental or private body exercising, or purporting to exercise, any executive, legislative, judicial, administrative, police, regulatory or taxing authority or power of any nature having actual jurisdiction;

Governmental Authorization” means any permit, license, franchise, approval, certificate, consent, ratification, permission, confirmation, endorsement, waiver, certification, registration, transfer, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement to which the Company is subject or which is required by the Company;

Guillermo” has the meaning set out on page 1;

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Interest” of a Shareholder means all the right, title and interest of that Shareholder in and to the applicable Shares;

Interest Rate” means the rate at which Flora receives loans to finance the Operations, regardless of the country of origin of the entity that provides the funds;

Legal Requirement” means any law, statute, ordinance, decree, requirement, order, treaty, proclamation, convention, rule or regulation (or interpretation of any of the foregoing) of any Governmental Authority, and the terms of any Governmental Authorization;

License” has the meaning set out in the recitals;

Non-Defaulting Shareholder” has the meaning set out in Section 7.3(a);

Notice of Default” has the meaning set out in Section 7.3(b);

Offered Interest” has the meaning set out in Section 5.2

Operations” means all undertakings, activities and operations in respect of all assets of the Company  engaged in by the Company;

Oscar” has the meaning set out on page 1;

Parties” means, collectively, the Shareholders and the Company, and their respective successors and permitted assigns;

Person” includes any individual, corporation or other body corporate, partnership, trustee, trust or unincorporated association, joint venture, syndicate, sole proprietorship, other form of business enterprise, executor, administrator or other legal representatives, regulatory body or agency or Governmental Authority, however designated or constituted;

Proportionate Share” means, at the relevant time, the then fraction expressed as a percentage having as its numerator the number of Shares held by a Shareholder and as its denominator the aggregate number of Shares then issued and outstanding;

Selling Shareholder Offer” has the meaning set out in Section 5.2;

Shareholder” at any particular time means, individually, any Person who at that time owns any Shares and who, in accordance with the provisions hereof or by operation of law, becomes bound by the provisions of this Agreement, and its respective successors and permitted assigns hereunder, and “Shareholders” means the Shareholders collectively;

Shares” means the shares in the Company, any securities into which those shares may be converted, exchanged, reclassified, redesignated, subdivided, consolidated or otherwise changed from time to time and any securities of any successor corporation to or corporation continuing from the Company into which those shares or such other securities may be changed or converted as a result of any merger, recapitalization or reorganization, statutory or otherwise;

Tax Act” means the Income Tax Act, Canada;

Third Party” has the meaning set out in Section 5.2;

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Third Party Offer” has the meaning set out in Section 5.2;

Transfer” means to sell, transfer, grant, assign, donate, create an Encumbrance or otherwise convey or dispose of (including by way of an earn-in, back-in right or any synthetic disposal of economic rights), or commit to do any of the foregoing;

Vote” has the meaning set out in Section 3.3(f); and

1.2
Rules of Construction
In this Agreement:
(a)
the terms “Agreement”, “this Agreement”, “the Agreement”, “hereto”, “hereof”, “herein”, “hereby”, “hereunder” and similar expressions refer to this Agreement in its entirety and not to any particular provision hereof;
(b)
references to an “Article”, “Section” or “Schedule” followed by a number or letter refer to the specified Article or Section of or Schedule to this Agreement;
(c)
the division of this Agreement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement;
(d)
words importing the singular number only shall include the plural and vice versa and words importing the masculine gender shall include the feminine and neuter genders and vice versa;
(e)
unless otherwise indicated, any reference to a statute, regulation or rule shall be construed to be a reference thereto as the same may from time to time be amended, re-enacted or replaced, and any reference to a statute shall include any regulations or rules made thereunder;
(f)
the words “include”, “includes” and “including” mean “include”, “includes” or “including”, in each case, “without limitation”;
(g)
reference to any agreement or other instrument in writing means such agreement or other instrument in writing as amended, modified, replaced or supplemented from time to time;
(h)
unless otherwise indicated, time periods within which a payment is to be made or any other action is to be taken hereunder shall be calculated excluding the day on which the period commences and including the day on which the period ends; and
(i)
whenever any payment to be made or action to be taken hereunder is required to be made or taken on a day other than a Business Day, such payment shall be made or action taken on the next following Business Day.
1.3             Currency
Unless otherwise indicated, all dollar amounts in this Agreement are expressed in United States dollars.

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1.4                    Additional Shares
Each Shareholder agrees that all Shares hereafter acquired by such Shareholder shall be subject in all respects to the provisions of this Agreement.
ARTICLE 2 
NATURE AND SCOPE OF AGREEMENT
2.1
Purposes of Agreement
In addition to the other matters set out herein, the Shareholders have entered into this Agreement to establish terms for the governance of the Company, the ownership of the Shares and the conduct of Operations.
2.2
No Partnership or Agency; Ability to Pursue Business Interests
Nothing in this Agreement will be deemed to constitute the Shareholders as the partner, agent or legal representative of the others or to create any fiduciary relationship among them. It is not the intention of the Parties to create, nor shall this Agreement be construed to create, any commercial or other partnership. Except as expressly provided in this Agreement or any subsequent agreement in writing executed by the Parties, each Party (other than the Company) will have the right to independently engage in and receive full benefits from business activities, whether or not competitive with the other’s activities or operations, without consulting the other Parties.
2.3
Priority of Agreements
The Shareholders agree that to the extent permitted by applicable Legal Requirements, in the event of any conflict between the terms of this Agreement and the constating documents of the Company including the by-laws, the terms of this Agreement are intended to govern and shall prevail, and the Shareholders shall use their best efforts and vote their Shares from time to time to cause the constating documents including the by-laws of the Company, as applicable, to be amended to remove such conflict, ambiguity or inconsistency and to permit the Company and its affairs to be carried out in accordance with this Agreement to the greatest extent possible.
2.4
Implied Covenants
There are no implied covenants contained in this Agreement other than those of good faith and honest dealing. In deliberating matters before the Board, each Director may consider, among other things (including the best interests of the Company), the interests of the Shareholder that nominated such Director, however in performing his or her role as a Director, including in making decisions with respect to Board matters, each Director shall conduct himself or herself solely on the basis of the fiduciary duty that he or she owes to the Company.
2.5
Capacity of Shareholders
As of the date hereof, each of the Shareholders represents and warrants to the others as follows, and each Shareholder acknowledges that the others are relying upon such representations and warranties in connection with the entering into of this Agreement:
(a)
if it is a company, it is a corporation validly existing under the laws of its respective jurisdiction of incorporation;

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(b)
the entering into of this Agreement and the completion of the transactions contemplated hereby will not result in a violation of any of the terms and provisions of any law applicable to it or if it is a company, any of its constating documents;
(c)
this Agreement has been: (i) if it is a company, duly authorized by all necessary corporate action on the part of it; and (ii) duly executed and delivered by it and is valid and legally binding on it in accordance with its terms, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in proceedings in equity or at law);
(d)
it has obtained all consents, approvals or authorizations required by any Governmental Authority or other Person in connection with the execution and performance of this Agreement;
(e)
it owns its Shares free of any Encumbrances;
(f)
it has incurred no obligation or liability, contingent or otherwise, for brokers or finder’s fees or the like that will in any way become an obligation of, or result in a valid claim against, the other Shareholder with respect to the matters provided for in this Agreement; and
(g)
except for the rights set out in this Agreement in favour of the other Shareholders and the Company, no Person has any agreement or option, or any right or privilege capable of becoming an agreement or option, to purchase or otherwise acquire any of the Shares owned by it.
2.6      Operating Model
The Shareholders agree that the Company will have its own employees and management reporting to the Board and/or various non-executive committees that will provide interface between the Board, the management team and the Shareholders and will provide advice to the Board, as needed. Daily operations will be carried out by the management of the Company. Day to day operations will be carried out by management of the Company. The Board may establish certain standing committees; however no such committee will have independent decision-making authority, but each will provide guidance to the Board.
ARTICLE 3 
CORPORATE MATTERS
3.1
Board
(a) Each of the Shareholders shall at all times vote or cause to be voted the Shares held by such Shareholder to elect and maintain as directors of the Company the applicable nominees in accordance with this Section 3.1.
(b) The Board shall consist of four Directors and four alternate Directors, one in respect of each Director.  A designated alternate may act in place of the applicable Director at any meeting of the Board at which such Director is not present or in connection with any actions to be taken by the Board or by any Director individually in the absence of such Director. Any alternate so acting shall, while so acting, be deemed to be a member of the Board.

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(c) Flora shall be entitled to nominate three Directors (and three alternates) to the Board and Guillermo, Cabrales and Oscar shall together nominate one Director and its alternate to the Board.  Initially, the Board nominees of Flora shall be Damian Lopez, Marcelo Lopez and Orlando Bustos the Board nominee of Guillermo, Cabrales and Oscar shall be Cabrales.  For clarity, the Shareholders shall act in accordance with the foregoing at each meeting of the Shareholders General Assembly  called and held to, among other things, elect the Board of Directors. If a Director ceases to hold office for any reason, the Shareholder that nominated the former Director shall as soon as practicable nominate a replacement Director and the Shareholders shall forthwith fill the vacancy on the Board by appointing the individual who has been so nominated as the replacement Director.
(d) If a Shareholder wishes to replace a Director nominated by it from time to time, then a meeting of the Shareholders General Assembly shall be called and at such meeting, the Shareholders shall vote and shall do all such acts and things as the Shareholder wishing to replace the Director, acting reasonably, may request for the purpose of effecting any such replacement. The Shareholders may not appoint or remove Directors except in accordance with the nomination rights provided by this Section 3.1.
(e) Flora shall be entitled to act as operator (or to direct that an Affiliate or a third party shall act as operator) of the Company and all operations in connection therewith. Flora shall also have the right to appoint the President and Chief Executive Officer of the Company and, save and except as provided in Section 3.2, all other officers of the Company.
(f) Subject to Guillermo, Oscar and Cabrales, holding an aggregate of 5% of the Shares of the Company, they will be entitled to jointly nominate one (1) director to be a member of the board of directors of Flora.
3.2
Chairman
The Shareholder with the largest holdings of Shares shall be entitled to appoint the Chairman of the Board from the Directors. The Chairman will serve as chair of any meeting of the Directors or Shareholders and shall have a casting vote in addition to his or her vote as a Director. The Chairman of the Board shall serve for a two year term.

3.3
Meetings of the Board
(a) The Board shall hold regular meetings on a quarterly basis. The Chief Executive Officer or legal representative shall give not less than 10 days’ notice to the Directors of such regular meetings. In case of emergency, 2 days notice shall be enough. Meetings of the Board shall be held at the domicile of the Company or at such other location as unanimously agreed by the Directors. Any Director shall be entitled to participate in a meeting of the Board, at which he or she is not physically present, by telephone or, video conference or similar electronic means and the chairman of such meeting shall ensure that such Director’s observations are duly recorded in the minutes of such meeting.. No resolution shall be deemed to have been duly passed by the Board by circulation or written consent, unless the resolution has been circulated in draft form, together with the information required to make a fully informed good faith decision with respect to such resolution and appropriate documents required to evidence passage of such resolution, if any, to all Directors at their usual address, and has been unanimously approved in writing by such of them as are entitled  vote on the resolution.

    (b) There shall be a quorum if three Directors are present. If quorum is not present within 30 minutes following the time at which the meeting is scheduled to take place, any Director present may adjourn the meeting to the same day in the immediately following week (or, if that day is not a Business Day, the next following Business Day) at the same time and place. The Chief Executive Officer or legal representative shall make a good faith effort to give notice to the Directors of the rescheduled meeting but otherwise shall make a publication in a newspaper of wide circulation to carry out the notice. A quorum shall be deemed to be present at such rescheduled meeting if at least any two Directors are present. Only those items included on the agenda for the original meeting may be acted upon at such a rescheduled meeting, but any additional matters may be considered with the consent of all Directors.

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    (c) The Directors appointed by the Shareholders as set forth herein may, upon notice provided to the Chairman of the Board and at the expense of such Shareholder, invite a reasonably limited number of other persons who have a reasonable business purpose for being present, to attend any meeting of the Board; provided that the Director(s) representing the other Shareholder consent, which consent need not be in writing, may be given by acquiescence and may not be unreasonably withheld. All costs regarding the invited persons will be paid by the Company, unless the guest’s attendance is in the exclusive interest of the Shareholder who extended the invitation, in which case, the Shareholder will assume the expenses.
Each notice of a meeting shall include an itemized agenda prepared by the Corporate Secretary in consultation with the Chairman in the case of a regular meeting or by the Director calling the meeting in the case of a special meeting, but any additional matters may be considered with the consent of all Directors. The Corporate Secretary shall prepare minutes of all meetings, including a rescheduled meeting, and shall distribute a copy of such minutes to the Directors prior to the next upcoming meeting of the Directors together with the notice thereof to be delivered pursuant to the provisions of Section 3.3(a). The minutes must be signed by the Chairman and Secretary of the relevant meeting. The minutes, when so signed, shall be the official record of the decisions made by the Board and shall be binding on the Company and the Shareholders. The minutes of a Board meeting shall be deemed to have been approved by a Director unless such Director objects in writing within 10 days after being provided with such minutes. Approval of the minutes shall not be a condition to the effectiveness of actions properly taken by the Board.
    (d) There will be a meeting of the Board of Directors when, by any means, all members can deliberate and decide by simultaneous or successive communication. In the latter case, the succession of communication shall occur immediately in accordance with the means used. The above shall be registered whether via fax or email, where the time, sender, message or tape recordings register the same records.
    (e) All decisions shall also be valid when all the members express their vote in writing (confirmation can be made by approving the minutes of the meeting) in accordance with Section 3.3(c). If members express their vote in separate documents, these shall be received in a maximum term of 15 days, counted as of the first communication received. The legal representative shall inform the members of the Board of Directors of the decision within five days after the receipt of the documents where the vote is expressed.
    (f) A vote of the Directors present in respect of a proposal submitted for a vote of the Board at a meeting at which a quorum is present is referred to as a “Vote”. Subject to the provisions of Section 3.3(g), approval of a resolution or other proposal brought before the Board shall require a greater than 50% affirmative Vote of the Directors present at a meeting at which a quorum is present, it being understood and agreed that the Chairman of the Board shall have a casting or tie breaking vote. For clarity, repayment of Advances will be based on a Vote of the Board and the nominees of Flora will not be obliged to refrain from voting on such matters.
    (g) The following matters shall require a 100% affirmative “Vote" of the Directors:
 
 
   (i)
Approval of the disposition of the License; and

 
   (ii)
Permanent cessation of operations or abandonment of the project after commencement of production other than due to health and safety reasons.


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3.4
Meetings of the Shareholders
(a) The Shareholders shall hold regular meetings of the Shareholders General Assembly on an annual basis, in accordance with Colombian law, in the first trimester of the year.  At each such meeting, the Administrator shall give a report of the voting results of the previous year’s meeting and shall also present the balance sheet and financial information and the annual budget as well as a presentation of all other issues that must be approved by the Shareholders’ General Assembly. Extraordinary meetings of the Shareholders’ General Assembly may be held to consider different issues based on the agenda that is distributed for the applicable meeting.  The Corporate Secretary shall give not less than 10 days’ notice to the Shareholders of such regular meetings. Additionally, any Director may call a special meeting of the Shareholders on not less than five days’ notice to the Corporate Secretary and all Shareholders.  In case of emergency, reasonable notice of a special meeting shall suffice. Meetings of the Shareholders shall be held at the principal domicile of the Company or at such other location as unanimously agreed by the Shareholders. The Shareholders may hold meetings without complying with the above notice requirements if all Shareholders are present at a meeting and waive the applicable notice requirements.
(b) There shall be a quorum if a Shareholder holding a minimum of 75% of the issued and outstanding Shares is present.  If the Assembly cannot meet due to lack of quorum, a new meeting shall be summoned where one or several Shareholders, regardless of the amount of represented Shares, shall validly meet and decide. The new meeting shall not be held before 10 days or after 30 days, both terms referring to business days, counted as of the date of the first meeting. A quorum shall be deemed to be present at such rescheduled meeting if  a Shareholder holding a minimum of 50% of the issued and outstanding Shares is present. Only those items included on the agenda for the original meeting may be acted upon at such a rescheduled meeting, but any additional matters may be considered with the consent of all Shareholders. For clarity, mergers, amalgamations, spin off or decisions regarding the listing of shares may only be discussed at a meeting of Shareholders if they have been previously disclosed on an agenda set out in connection with the applicable meeting of Shareholders.
(c) Each notice of a meeting shall include an itemized agenda prepared by the Chief Executive Officer or legal representative in consultation with the Chairman in the case of a regular meeting or by the Shareholder calling the meeting in the case of a special meeting, but any additional matters may be considered with the consent of all Shareholders. The Corporate Secretary shall prepare minutes of all meetings, including a rescheduled meeting, and shall distribute a copy of such minutes to the Shareholders together with the notice thereof to be delivered pursuant to the provisions of Section 3.4(a). The minutes shall be the official record of the decisions made by the Shareholders and shall be binding on the Company and the Directors. Minutes of the each Shareholders’ meeting shall be signed by the Chairman of the meeting and the Corporate Secretary.  The Company shall have a minute book and all Shareholders, shall have an inspection right according to Colombian Corporate Law.
(d) There will be a meeting of the General Assembly of Shareholders when by any means, all members can deliberate and decide by simultaneous or successive communication. In the latter case, the succession of communication shall occur immediately in accordance with the means used. The above shall be registered whether via email, where the time, sender, message or tape recordings register the same records.
(e) All decisions shall also be valid when all of the Shareholders express their vote in writing. If Shareholders express their vote in separate documents, these shall be received in a maximum term of 20 days, counted as of the first communication received. The President and Corporate Secretary advise the Assembly of the decision within five days following the receipt of the documents where the vote is expressed. The General Assembly of Shareholders shall amend the Bylaws to adjust them.

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(f) A vote of the Shareholders present in an Assembly in respect of a proposal submitted for a vote of the Shareholders at a meeting at which a quorum is present is referred to as a “Vote”. Approval of a resolution or other proposal brought before the Shareholders shall require a greater than 50% affirmative Vote of the Shareholders present at a meeting at which a quorum is present. The  General Assembly of Shareholders shall amend the Bylaws to be in accordance with this Agreement.
3.5
Auditors
The initial external auditors of the Company shall be determined by Flora.
3.6
Fiscal Year
The fiscal year of the Company, as mandated by Colombian corporate law, shall end on December 31 in each year.
3.7
Agreement to Take Corporate Actions
The Shareholders shall themselves do, and/or cause the Company to do, or otherwise cause to be done, all such acts, including amendment or supplement of the constating documents of the Company, and from time to time execute and deliver or cause to be executed and delivered all such documents, instruments and agreements as may be required under applicable Legal Requirements or as may be necessary or advisable in the reasonable opinion of any Shareholder, to give effect to the terms and provisions of this Agreement or to any duly adopted resolution of the Board or the Shareholders so that the Company and the Shareholders will be subject to all of the obligations and liabilities expressed to be imposed upon the Company and the Shareholders respectively hereunder and the intentions of the Parties hereunder can be implemented.
ARTICLE 4 
FREE CARRIED INTEREST AND AVAILABLE CASH
4.1       Free Carried Interest of Guillermo, Cabrales and Oscar
(a) The interest of Guillermo, Cabrales and Oscar in and to their respective Shares pursuant to this Agreement shall be a free carried interest (the “Free Carry”) such that only Flora shall either arrange for third party financing and/or fund all costs related to the Company including pursuant to approved programs and budgets by making Advances.  Flora shall have the right to fund the Company by loans (i.e. the Advances), Down Payment for Future Capitalizations or by equity so long as such funding is non dilutive to Guillermo, Cabrales and Oscar during the period in which the Free Carry is in effect.
(b) The Free Carry is personal to all of Guillermo, Cabrales and Oscar (as they exist as at the Execution Date) and may not be assigned by Guillermo, Cabrales or Oscar.  The Free Carry shall automatically terminate upon Flora investing an aggregate of USD$25,000,000 into the Company as equity or Down Payment for Future Capitalization (the “Financing Milestone”).

(c)             The Free Carry applies to the number of Common Shares held by Guillermo, Cabrales and Oscar that represent 10% together of the share capital of the Company.

(d) If the Free Carry terminates pursuant to the provisions of Section 4.1(b), as a result of a Transfer, pursuant to Article 5 herein, or as a result of the Financing Milestone being satisfied, then the transferee of Guillermo, Cabrales or Oscar, as the case may be, or each of Guillermo, Cabrales and Oscar, must contribute to Programs and Budgets approved by Vote of the Board or be subject to dilution.  The provisions of Schedule “B” will be applicable.

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4.2    Available Cash
As and when there is Available Cash and after the Financing Milestone has been received, subject to receipt of a Vote of the Board, the Company shall repay the Advances, if any, including without limitation, as to principal and interest.
ARTICLE 5 
TRANSFERS; RIGHT OF FIRST REFUSAL; DRAG ALONG RIGHTS; CONVERSION RIGHT
5.1
Restrictions on Transfer
(a) A Shareholder shall Transfer, directly or indirectly, its Shares in accordance with: (i) Section 5.2 (Right of First Refusal) – this only applies to Oscar, Cabrales and Guillermo; (ii) Section 5.4 (Obligation to Sell – Drag Along Rights) – this only applies to Flora; or (iii) with the prior written consent of the other Shareholder – this only applies to Oscar, Cabrales and Guillermo which consent of Flora may be withheld for any reason. A Transfer by a Shareholder or its Affiliates of less than all of their Shares is not permitted.
(b) No Transfer shall be effective and no transferee of a Shareholder’s Shares shall have the rights of such Shareholder hereunder unless: (i) the Transfer was completed in compliance herewith (including compliance with Section 5.2 and Section 5.4, if applicable); (ii) the transferor has provided to the other Shareholder notice of such Transfer; and (iii) the transferee, as of the effective date of the Transfer, has executed an accession agreement in form and substance acceptable to the other Shareholder, acting reasonably. Subject thereto, the transferee shall be deemed to be a Party to this Agreement.
(c) Notwithstanding anything herein, none of Guillermo, Cabrales or Oscar shall have the right to Transfer any Shares until after 24 months have elapsed from the date hereof or the Financing Milestone has been achieved.
5.2
Right of First Refusal
Subject to the provisions of Section 5.3, Guillermo, Cabrales or Oscar, as the case may be, may transfer all (but not less than all) of their respective Shares (the “Offered Interest”) only if Guillermo, Cabrales or Oscar, as the case may be, has received a bona fide written offer (the “Third Party Offer”) from an arm’s length third party (the “Third Party”) that states the price, which must be payable all in cash, in the aggregate and on a per Share basis, which price is payable in full on closing and all other terms and conditions upon which it offers to acquire the Offered Interest (the “Selling Shareholder Offer”), states the name of the Third Party and the ultimate controlling shareholder(s) or owner(s) of such Third Party, or if the Third Party is owned, directly or indirectly, by a public company, the name of such public company, and states the name and contact information of an authorized person of the Third Party. Flora shall have 45 days after receipt of the Selling Shareholder Offer (and copy of the Third Party Offer) to notify Oscar, Cabrales or Guillermo, as the case may be, whether it accepts or declines to accept the Selling Shareholder Offer. If Flora does not send a written notice, Flora shall be deemed to have declined the Selling Shareholder’s Offer. Guillermo, Cabrales or Oscar, as the case may be, shall have the right transfer its Offered Interest on the terms contained in the Third Party Offer so long as the transaction is completed within the next 90 days, failing which the right of first refusal set out in this Section 5.2 shall again revive. If Flora accepts the Selling Shareholder Offer, Guillermo, Cabrales or Oscar, as the case may be, shall complete the transfer of its Offered Interest to Flora in accordance with the terms of the Selling Shareholder Offer. The right of first refusal set forth in this Section 5.3 may, to the extent applicable, work in conjunction with the bylaws of the Company.

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5.3       Transfer of Shares to Third Party
The transfer of Shares in Section 5.2 shall be subject, between the parties hereto to the following additional terms and conditions:
(a)    No transferee of the Shares of Guillermo, Cabrales or Oscar, as the case may be, shall have the rights of a Shareholder unless and until Guillermo, Cabrales or Oscar, as the case may be, has provided to Flora a counterpart to this Agreement, which is in form and content acceptable to Flora acting reasonably, signed by the transferee pursuant to which the transferee agrees, as of the effective date of the transfer, to observe and be bound by the terms of this Agreement to the same extent as Guillermo, Cabrales or Oscar, as the case may be.
(b) No transfer permitted by this Section shall relieve Guillermo, Cabrales or Oscar, as the case may be, of its share of any liability, cost, penalty or fine whether accruing before or after such Transfer, which arises out of Operations conducted prior to such transfer.
(c) Guillermo, Cabrales or Oscar, as the case may be, and the transferee shall bear all tax consequences of the transfer of the Shares.
(d) On a transfer, if the aggregate equity ownership of Guillermo, Cabrales and Oscar falls below 10%, then their nominee directors and officers corresponding to each of the Company and Flora shall resign in favour of the Flora’s nominees.
5.4   Obligation to Sell – Drag-Along Rights
(a) If Flora desires to sell all (but not less than all) of its Shares, it shall have the right to secure from an arm’s length (as defined in the Tax Act) third party (the “Drag Along Right Offeror”) a bona fide offer (a “Drag Along Right Offer to Purchase”) to Guillermo, Cabrales and Oscar to purchase all of their respective Shares for cash (the “Drag Along Right Purchase Price”). Upon receipt of the Drag Along Right Offer to Purchase, together with notification from Flora that it seeks to sell all of their respective Shares to the Drag Along Right Offeror, Guillermo, Oscar and Cabrales will be deemed to have accepted the Drag Along Right Offer to Purchase in accordance with its terms and conditions.
(b) If Guillermo, Cabrales or Oscar, as the case may be, fails to transfer any of its respective Shares that it is required to transfer to the Drag-Along Right Offeror as provided in this Section 5.4, Guillermo, Cabrales or Oscar fails, as the case may be, will have breached this Agreement and Flora can obtain from the Court of Arbitration, the declaration of breach and the order of assignment and registration of the transfer of the applicable Shares, to record the name of the Drag-Along Right Offeror in the ledgers of the Company as owner of the applicable Shares purchased by the Drag-Along Right Offeror, and order the issuance of Share certificates to the Drag-Along Right Offeror for such Shares on behalf of the Drag-Along Right Offeror.
 (c) The Court may order that the money received from the purchase to be made available for Guillermo, Cabrales or Oscar, as the case may be. After such registration, Guillermo, Cabrales or Oscar, as the case may be, shall stop exercising their rights regarding the Shares, except for the right to receive, interest-free, the purchase money received by the Company at the time of the delivery of the certifications which previously represented such Shares in question.
5.5        Death, Bankruptcy or Divorce Proceeding of Guillermo, Oscar or Cabrales
In the event of the death, bankruptcy or division of assets including the Shares of Guillermo, Cabrales or Oscar, as the case may be, as a result of divorce proceedings involving Guillermo, Cabrales or Oscar, as the case may be, the Shares of Guillermo, Oscar or Cabrales, as the case may be, shall be transferred equally to the shareholders, other than Flora, who are not subject to the precipitating events, with deemed effect to be immediately preceding any of such three precipitating events.  The consideration to be paid by Guillermo, Cabrales or Oscar, as the case may be, shall be equal to the Fair Market Value thereof.  If Guillermo, Cabrales or Oscar determine not to purchase the Shares in questions, Flora shall have the right to purchase the Shares. If the Shareholders cannot agree on Fair Market Value, the applicable Shareholders may refer the matter to arbitration pursuant to the provisions of Section 7.4.  Any determination so made by arbitration shall be binding on the applicable Shareholders.

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5.6        Conversion
Each of Guillermo, Cabrales and Oscar shall have the right convert 50% of their respective Shares into shares of Flora if such shareholder notifies Flora, in writing, prior to Flora announcing a material equity financing or its intention to obtain a listing of Flora’s shares on a stock exchange. Flora shall give each of Guillermo, Cabrales and Oscar 5 Business Days prior written notice prior to announcing  a material equity financing or public listing.
ARTICLE 6 
CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS
6.1
Confidentiality
All Confidential Information shall be treated as confidential by the Parties and shall not be disclosed to any other Person other than in circumstances where a Party has an obligation to disclose such information in accordance with applicable securities legislation, the rules of any recognized stock exchange or any other applicable Legal Requirements or any Governmental Authorization. Notwithstanding the foregoing, each of the Parties acknowledges and agrees that: (i) each Shareholder may disclose Confidential Information to: (A) a person providing financing or funding to the Shareholder, as applicable, in respect of its obligations hereunder; (B) any prospective purchaser of the Interests and/or Advances held by the Shareholder, together with such prospective purchaser’s financiers, consultants and advisors (financial and legal); so long as, in each case, prior to receiving any such information the recipient enters into a confidentiality agreement with the disclosing Shareholder pursuant to which the recipient provides a confidentiality undertaking in favour of the Company and the Shareholders to maintain the confidentiality of the Confidential Information in a manner consistent with this Agreement; and (ii) each of the Parties may disclose Confidential Information to their respective directors, officers and employees (and the directors, officers and employees of their respective Affiliates) and the directors, officers, partners or employees of any financial, accounting, legal and professional advisors of such Party and its Affiliates, as well as any contractors and subcontractors of such Party, provided that each of such individuals to whom Confidential Information is disclosed is advised of the confidentiality of such information and is directed to abide by the terms and conditions of this section.
6.2
Public Announcements
During the term of this Agreement, each Party shall, if practicable in advance of making, or any of its Affiliates making, a public announcement concerning this Agreement or the matters contemplated herein to a stock exchange or as otherwise required by applicable securities legislation, applicable Legal Requirements or any Governmental Authorization, advise the other Parties of the text of the proposed public announcement and, to the extent legally permitted, provide such other Parties with a reasonable opportunity to comment on the content thereof. If any of the Parties determines that it is required to publish or disclose the text of this Agreement in accordance with any Legal Requirement, it shall provide the other Parties with an opportunity to propose appropriate redactions to the text of this Agreement, and the disclosing Party hereby agrees to consider any such suggested redactions to the extent permitted by any Legal Requirements. If a Party does not respond to a request for comments within 48 hours (excluding days that are not Business Days) or such shorter period of time as the requesting Party has determined is necessary in the circumstances, acting reasonably and in good faith, the Party making the disclosure shall be entitled to issue the disclosure without the input of the other Parties. The Party making the announcement shall disclose, or permit the disclosure of, only that portion of Confidential Information required to be disclosed by applicable securities legislation, applicable Legal Requirements or any Governmental Authorization. The final text of the disclosure and the timing, manner and mode of release shall be the sole responsibility of the Party issuing the disclosure.

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6.3
Duration of Confidentiality
The provisions of this Article 6 shall apply during the term of this Agreement and for a period of two years following the termination of this Agreement and shall continue to apply to any Party who withdraws, or is deemed to have withdrawn or who Transfers its Shares for two years following the date of such occurrence.
ARTICLE 7 
GOVERNING LAW; DISPUTES; DEFAULT
7.1
Governing Law
This Agreement shall be construed and enforced in accordance with and governed by the laws of Colombia, without regard to choice of laws or conflict of laws principles that would require or permit the application of the laws of any other jurisdiction.
7.2
Arbitration
All disputes arising out of or in connection with this Agreement including any question regarding its existence, validity, performance, effects, interpretation, breach or termination, shall be settled by a court of arbitration comprised by three arbitrators, certified attorneys, appointed by the parties by mutual agreement, and in absence of agreement, by the Chamber of Commerce of Bogota D.C., which shall be conducted in the offices of such Center, and shall decide according to the Law and be governed by the legal provisions in force on the matter.
7.3
              Defaults
(a)
A Shareholder:

(i)
subject to a Bankruptcy Proceeding or Insolvency pursuant to Colombian or Canadian laws;

(ii)
refuses, neglects or otherwise fails to comply with the Transfer restrictions contained in this Agreement;

(iii)
if he/she does not comply with the transfer of shares he/she is obliged to, under the Drag-Along Right.

(iv)
is in material default of its obligations under this Agreement;
shall be referred to as the “Defaulting Shareholder”, and the other Shareholders shall be referred to as the “Non-Defaulting Shareholders”.
(b)
Any Non-Defaulting Shareholder shall have the right to give the Defaulting Shareholder(s) a written notice of default (a “Notice of Default”), which shall describe the default in reasonable detail and state the date by which the default must be cured. If a longer term is required, the Defaulting Shareholder(s) will request a reasonable extension of the term, which must be accepted in writing to be considered granted by the Non-Defaulting Shareholders. Whether nothing is said about the term the default shall be cured, there will be a term of 30 days, which will be the minimum term to comply. Any difference in terms of the term required to comply or its extension, may be resolved through a friendly composition in the terms of the second section of Chapter VIII of Law 1563 of 2012. Failure of either Non-Defaulting Shareholder to give a Notice of Default shall not release the Defaulting Shareholder(s) from any of their respective duties under this Agreement.

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Any dispute as to whether a default has been committed hereunder or otherwise in relation to this provision may be referred to arbitration for resolution.
7.4
             Appraisers
(a)
If a determination of Average Fair Market Value is required, the Defaulting Shareholder(s) and the Non-Defaulting Shareholder(s) shall appoint an Appraiser for a total of two Appraisers. Each of the two Appraisers appointed by this Section will appoint a third independent Appraiser within 20 Business Days of their appointment. If a Shareholder does not appoint an Appraiser within said 10 Business Day period, the Appraiser appointed by the other Shareholders shall determine the Fair Market Value, which shall be deemed to be the Average Fair Market Value.
(b)
The Appraisers appointed shall each determine the Fair Market Value within 60 days of the appointment of the third independent Appraiser and the average of the three Fair Market Values determined shall be the “Average Fair Market Value” and such amount shall not be subject to the dispute resolution procedures set out in this Agreement.
(c)
The Defaulting Shareholder(s) shall proportionately pay all fees and expenses charged by the Appraiser(s). The Appraisers shall be entitled to retain such qualified independent appraisers as each may deem appropriate to assist with its valuation.
7.5
              No Penalty
The Shareholders acknowledge and agree that the rights and remedies conferred by this Article do not constitute a penalty, unlawful forfeiture or penalty interest rates, and that such rights and remedies are necessary to ensure that the interests of the Shareholders are appropriately balanced having regard to the relative funding provided by each Shareholder from time to time.
ARTICLE 8 
TERMINATION
8.1
Term
(a) Except as otherwise provided herein, this Agreement shall commence on the date hereof and continue in full force and effect until the earlier of:
(i)
the date on which no Shareholder owns legally or beneficially any Shares;
(ii)
the date on which this Agreement is terminated in writing by all of the Shareholders who continue to beneficially own any Shares; or
(iii)
the winding-up or dissolution of the Company,
provided however, that this Agreement shall cease to have effect with regard to any Person who ceases to hold directly or indirectly any Shares pursuant to and in accordance with the terms of this Agreement save for any provisions hereof which, expressly or by implication, are to continue in full force and effect thereafter.

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(b) A termination of all or part of this Agreement shall not affect or prejudice any rights or obligations which have accrued or arisen under this Agreement prior to the time of termination, including any liability, whether accruing before or after such termination, which arises out of activities or operations conducted prior to such termination, and such rights and obligations shall survive the termination of all or any part of this Agreement.
ARTICLE 9 
GENERAL PROVISIONS
9.1
Notices
(a) Any notice or other communication that is required or permitted to be given hereunder shall be in writing and shall be delivered in person, transmitted by email or similar means of recorded electronic communication or sent by registered mail or courier, charges prepaid, addressed as follows:
(i)     
if to Flora, at

 
 
65 Queen Street West
Suite 800, Toronto, Ontario
Canada M5H 2M5
 
 
 
Attention:  Chief Executive Officer
Email:dlopez@fmresources.ca
 
 
(ii)     
if to Guillermo at:
 
 

Carrera 35ª no. 46-04 Bucaramanga Santander Colombia telefono (037)6430024
 
 

Attention: Guillermo Ramirez Cabrales
Email: grc.53@hotmail.com
 
 
(iii)    
if to Cabrales at:

 
 
Carrera 35ª no. 46-04 Bucaramanga Santander Colombia telefono (037)6430024
 
 

Attention: Guillermo Ramirez Cabrales
Email: grc.53@hotmail.com
 
 
(iv)    
if to Oscar at:

 
 
Vereda el Guamo, casa 8, Piedecuesta, Santander, Colombia

 
 
Attention: Oscar Mauricio Franco Ulloa
Email: osmafrul@gmail.com
 
 

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Any such notice or other communication shall be deemed to have been given and received on the day on which it was delivered or transmitted by email (or, if such day is not a Business Day or such notice or other communication was delivered or transmitted after 5:00 p.m. (recipient’s time), on the next following Business Day).
(b) Any Party may at any time change its address for service from time to time by giving notice to the other Parties in accordance with this section.
9.2
Force Majeure
(a) Notwithstanding anything in this Agreement to the contrary, if any Party is unable wholly or in part by Force Majeure to carry out any obligation of such Party under this Agreement, then such Party shall forthwith give the other Parties written notice of the Force Majeure and the expected delays in meeting applicable obligations, whereupon that obligation of the Party giving the notice will be suspended so far as it is affected by that Force Majeure during but not longer than its continuance. The affected Party or Parties must use all reasonable diligence to resolve that Force Majeure as quickly as possible.
(b) Forthwith after the resolution of an applicable Force Majeure, the affected Party shall send written notice of such resolution to the other Parties, and the dates for satisfying the applicable obligation shall be deemed to have been extended by the period of time during which the Force Majeure was in effect.
9.3       Entire Agreement
This Agreement constitutes the entire agreement among the Parties and supersedes all prior agreements, understandings, negotiations and discussions of the Shareholders, whether written or oral, with respect to the subject matter hereof. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise, relating to the subject matter hereof except as provided in this Agreement.
9.4           No Waiver
The failure of any Party to insist upon strict adherence to any provision of this Agreement on any occasion shall not be considered a waiver or deprive that Party of the right thereafter to insist upon strict adherence to such provision or any other provision of this Agreement. No purported waiver shall be effective as against any Party unless consented to in writing by such Party. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent or other breach.
9.5
Severability
If any provision of this Agreement is determined to be invalid, illegal or unenforceable in any respect, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. To the extent that any provision is found to be invalid, illegal or unenforceable, the Parties shall act in good faith to substitute for such provision, to the extent possible, a new provision with content and purpose as close as possible to the provision so determined to be invalid, illegal or unenforceable.

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9.6
Anti-Corruption Policies and Procedures
For so long as this Agreement remains in effect, the Shareholders shall implement and maintain appropriate policies and procedures applicable to such Parties, their respective Affiliates, and their respective directors, officers, employees, agents, consultants and contractors involved in Operations, designed to ensure that Operations are conducted in compliance with the Canadian Corruption of Foreign Public Officials Act, and any similar act under any applicable Legal Requirements that any of such Parties and their respective Affiliates are subject to, together with international human rights norms as reflected in the UN Guiding Principles on Business and Human Rights. The Shareholders shall permit the others to undertake reasonable due diligence and audit processes in respect of the subject matter set out in this Section 9.6, and shall each provide the others with access to all documents, information and personnel as reasonably requested from time to time in order to verify ongoing performance and compliance with the foregoing.
9.7
Further Assurances
Each of the Parties to this Agreement shall from time to time and at all times do all such further acts and execute and deliver all further agreements and documents as shall be reasonably required in order fully to perform and carry out the terms of this Agreement.
9.8
Assignment, Successors, etc.
(a) This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns. Except as expressly provided herein, no Party shall assign this Agreement or any of the benefits hereof or obligations hereunder without the prior written consent of each of the other Parties.
(b) In the event that any Party proposes to enter into any acquisition, amalgamation, arrangement, merger or combination or any transaction pursuant to which another Person or a successor to such Party becomes bound by the provisions of this Agreement by agreement or by operation of law, the Person resulting from such acquisition, amalgamation, arrangement, merger, combination or transaction shall enter into an agreement in form and substance satisfactory to the other Parties pursuant to which such Person agrees to be bound by this Agreement as though it were a Party hereto in the place of the Party entering into the acquisition, amalgamation, arrangement, merger, combination or transaction.
9.9
              Amendment and Waivers
No amendment or waiver of any provision of this Agreement shall be binding on a Party unless consented to in writing by such Party. No failure or delay to exercise, or other relaxation or indulgence granted in relation to, any power, right or remedy under this Agreement shall operate as a waiver of it or impair or prejudice it nor shall any single or partial exercise or waiver of any power, right or remedy preclude its further exercise or the exercise of any other power, right or remedy.
[Remainder of page has been intentionally left blank.]

IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date of this Agreement.
   
FLORA GROWTH CORPORATION
 
     
By:
Deborah Battiston
 
 
Name: Deborah Battiston
 
 
Title: Chief Financial Officer
 
     
 
Damian Lopez
 
 
Name: Damian Lopez
 
 
Title: Director
 

         
“Roberto Paez”
   
“Guillermo Andres Ramirez Martinez”
 
(WITNESS)
    GUILLERMO ANDRES RAMIREZ MARTINEZ  

   
 
“Roberto Paez”     “Guillermo Ramirez Cabrales”
 
(WITNESS)
    GUILLERMO RAMIREZ CABRALES  
         
“Roberto Paez”
     “Oscar Mauricio Franco Ulloa”
 
 (WITNESS)     OSCAR MAURICIO FRANCO ULLOA  









Schedule “A”

DESCRIPTION OF THE LICENSE


TO BE ADDED



Schedule “B”

PRO RATA FUNDING PRINCIPLES AFTER FREE CARRY
1. After the Free Carry is no longer in effect there shall be dilution of the Interest of a Shareholder if they shall elect not to participate in an approved program or budget or elect to participate for less than its respective Proportionate Share in an approved program or budget.

2. After the Free Carry is no longer in effect, after the approval of a program and budget by Vote of the Board, the Chairman of the Board shall forthwith thereafter provide the Shareholders with notice of such approval as well as the details of the applicable approved program and budget.

3. The Shareholders shall have a period of 15 Business Days after receipt of such notice to advise the Chairman of the Board whether: (i) they shall contribute to the approved program and budget in an amount equal to their Proportionate Share; (ii) they shall contribute to the approved program and budget in an amount equal to less than their Proportionate Share; or (iii) they shall not contribute any amount to the approved program and budget.

4. If a Shareholder does not send the notice contemplated by Section 3 of this Schedule “B” within the said 15 Business Days, the Shareholder shall be deemed to have elected not to contribute any amount to the approved program and budget.

5. If the Shareholders elect to participate in any approved program and budget, ongoing Costs shall be funded by the Shareholders in accordance with their respective Proportionate Share.

6. If a Shareholder elects to contribute to the approved program and budget in an amount equal to less than their Proportionate Share or elects or is deemed to elect that they shall not contribute any amount to the approved program and budget, then their Proportionate Share shall be subject to dilution in accordance with Section 12 of this Schedule “B”.

7. On the basis of approved programs and budgets, the Chairman of the Board shall submit to each Shareholder a billing for estimated cash requirements for the approved Program or Budget.

8. Within 60 Business Days after receipt of each billing, each Shareholder shall contribute its Proportionate Share of the estimated amount required to fund the Costs.

9. The Chairman of the Board shall promptly submit to each Shareholder billings for all other authorized Costs as they are incurred. Time is of the essence in payment of all such billings.

10. The Company shall at all times be entitled to maintain a cash balance approximately equal to the estimated disbursements for the next 90 Business Days. Each Shareholder shall be responsible for arranging all financing required to fund its Proportionate Share contribution to any approved program and budget in which it is participating.

11. If a Shareholder elects to participate in an approved program and budget, but then fails to make its contributions in respect of that Program, its Proportionate Share shall be diluted as set out in Section
12 of this Schedule “B” however, the total actual and deemed Costs incurred by the other Shareholders or Shareholder ((b) in the formula) shall be multiplied by 2 so that there shall be accelerated dilution under such circumstances.

12. Dilution shall be effected by recalculated the Proportionate Shares using the following formula:

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% Interest = a/(a+b) x 100%

where a = the total actual and deemed Costs incurred by the particular Shareholders, including without limitation, as and by way of Advances; and

b = the total actual and deemed Costs incurred by the other Shareholder, from the Execution Date to the date of such calculation.


13. Adjustments to the Proportionate Shares shall be effected by the transfer of the applicable number of Shares held by the contributing Shareholder to the non contributing Shareholder.

14. Each Shareholder’s Proportionate Share and related equity account balance shall be shown in the accounting records of the Company.

15. No corporate resolutions shall be required to effect any such adjustment; however, if applicable corporate law requires that there shall be such a resolution, the Board or the Shareholders, as the case may be, shall all vote in favour of the applicable adjustment.

FLORA GROWTH CORP.

STOCK OPTION PLAN

1. STATEMENT OF PURPOSE

1.1 Principal Purposes – The principal purposes of the Plan are to provide the Company with the advantages of the incentive inherent in share ownership on the part of employees, officers, directors and consultants responsible for the continued success of the Company; to create in such individuals a proprietary interest in, and a greater concern for, the welfare and success of the Company; to encourage such individuals to remain with the Company; and to attract new employees, officers, directors and consultants to the Company.

1.2 Benefit to Shareholders – The Plan is expected to benefit shareholders by enabling the Company to attract and retain skilled and motivated personnel by offering such personnel an opportunity to share in any increase in value of the Shares resulting from their efforts.

2. INTERPRETATION

2.1 Defined Terms – For the purposes of this Plan, the following terms shall have the following meanings:

(a)
Act” means the Securities Act (Ontario), as amended from time to time;

(b)
Affiliate” shall have the meaning ascribed to such term in the Act;

(c)
Associate” shall have the meaning ascribed to such term in the Act;

(d)
Board” means the Board of Directors of the Company;

(e)
Change in Control” means:


(i)
a takeover bid (as defined in the Act), which is successful in acquiring Shares,


(ii)
the change of control of the Board resulting from the election by the members of the Company of less than a majority of the persons nominated for election by management of the Company,


(iii)
the sale of all or substantially all the assets of the Company,


(iv) he sale, exchange or other disposition of a majority of the outstanding Shares in a single transaction or series of related transactions,


(v)
the dissolution of the Company’s business or the liquidation of its assets,


(vi)
a merger, amalgamation or arrangement of the Company in a transaction or series of transactions in which the Company’s shareholders receive less than 51% of the outstanding shares of the new or continuing corporation, or


(vii)
the acquisition, directly or indirectly, through one transaction or a series of transactions, by any Person, of an aggregate of more than 50% of the outstanding Shares;

(f)
Committee” means a committee of the Board appointed in accordance with this Plan, or if no such committee is appointed, the Board itself;



(g)
Company” means Flora Growth Corp., a company incorporated under the laws of Ontario;

(h)
Consultant” means an individual, other than an Employee, senior officer or director of the Company or a Related Company, or a Consultant Company, who;


(i)
is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Company or a Related Company, other than services provided in relation to a distribution,


(ii)
provides the services under a written contract between the Company or a Related Company and the individual or Consultant Company,


(iii)
in the reasonable opinion of the Company spends or will spend a significant amount of time and attention on the affairs and business of the Company or a Related Company, and


(iv)
has a relationship with the Company or a Related Company that enables the individual or Consultant Company to be knowledgeable about the business and affairs of the Company;

(i)
Consultant Company” means, for an individual Consultant, a company of which the individual is an employee or shareholder, or a partnership of which the individual is an employee or partner;

(j)
CSE” means the Canadian Securities Exchange;

(j)
Date of Grant” means the date specified in the Option Agreement as the date on which the Option is effectively granted;

(k)
Disability” means any disability with respect to an Optionee which the Board, in its sole and unfettered discretion, considers likely to prevent permanently the Optionee from:




(i)
being employed or engaged by the Company, a Related Company or another employer, in a position the same as or similar to that in which he was last employed or engaged by the Company or a Related Company; or

(ii)          acting as a director or officer of the Company or a Related Company;

(l)
Disinterested Shareholder Approval” means an ordinary resolution approved by a majority of the votes cast by members of the Company at a shareholders’ meeting, excluding votes attaching to Shares beneficially owned by Insiders to whom Options may be granted and Associates of those persons and including, on a resolution that requires disinterested approval, votes case by any holders of non-voting and subordinate voting shares of the Company who shall be given full voting rights on such a resolution;

(m)
Effective Date” means the effective date of this Plan, which is the day of its approval by the shareholders of the Company;

(n)
Eligible Person” means:


(i)
an Employee, senior officer or director of the Company or any Related Company,

 (ii)         a Consultant,



(iii)
an issuer, all of the voting securities of which are beneficially owned by one or more of the persons referred to in (i) above,


(iv)
a Management Company Employee if at the Date of Grant the Company is a “reporting issuer” as defined in the Act;

    (o)      “Employee” means:


(i)
an individual who is considered an employee under the Income Tax Act (Canada) (i.e. for whom income tax, employment insurance and CPP deductions must be made at source),


(ii)
an individual who works full-time for the Company or a Related Company providing services normally provided by an employee and who is subject to the same control and direction by the Company or a Related Company over the details and methods of work as an employee of the Company or a Related Company, but for whom income tax deductions are not made at source, or


(iii)
an individual who works for the Company or a Related Company, on a continuing and regular basis for a minimum amount of time per week, providing services normally provided by an employee and who is subject to the same control and direction by the Company or a Related Company over the details and methods of work as an employee of the Company or a Related Company, but for whom income tax deductions are not made at source;

(p)
Exchange” means the stock exchange or over the counter market on which the Shares are listed;

(q)
Exchange Act” means the United States Securities Exchange Act of 1934, as amended;

(r)
Fair Market Value” means, where the Shares are listed for trading on an Exchange, the last closing price of the Shares before the Date of Grant on the Exchange which is the principal trading market for the Shares, as may be determined for such purpose by the Committee, provided that, so long as the Shares are listed only on the CSE, the “Fair Market Value” shall not be lower than the last closing price of the Shares before the Date of Grant less the maximum discount permitted under the policies of the CSE;

(s)
Guardian” means the guardian, if any, appointed for an Optionee;

(t)
Insider” shall have the meaning ascribed to such term in the Act;

(t)
Investor Relations Activities” means any activities or oral or written communications, by or on behalf of the Company or a shareholder of the Company that promote or reasonably could be expected to promote the purchase or sale of securities of the Company, but does not include:


(i)
the dissemination of information provided, or records prepared, in the ordinary course of business of the Company

(A) to promote the sale of products or services of the Company, or

(B) to raise public awareness of the Company,

that cannot reasonably be considered to promote the purchase or sale of securities of the Company,


 (ii)        activities or communications necessary to comply with the requirements of

(A) applicable securities laws,


(B)
the rules and policies of the CSE, if the Shares are listed only on the CSE, or the by-laws, rules or other regulatory instruments of any other self-regulatory body or exchange having jurisdiction over the Company,


(iii)
communications by a publisher of, or writer for, a newspaper, magazine or business or financial publication, that is of general and regular paid circulation, distributed only to subscribers to it for value or to purchasers of it, if


(A)
the communication is only through the newspaper, magazine or publication and


(B)
the publisher or writer receives no commission or other consideration other than for acting in the capacity of publisher or writer, or


(iv)
activities or communications that may be otherwise specified by the CSE, if the Shares are listed only on the CSE;

(v)
Management Company Employee” means an individual employed by a Person providing management services to the Company, which management services are required for the ongoing successful operation of the business enterprise of the Company but excluding a Person engaged in Investor Relations Activities;

(w)
Option” means an option to purchase unissued Shares granted pursuant to the terms of this Plan;

(x)
Option Agreement” means a written agreement between the Company and an Optionee specifying the terms of the Option being granted to the Optionee under the Plan;

(y)
Option Price” means the exercise price per Share specified in an Option Agreement, adjusted from time to time in accordance with the provisions of Sections 6.2 and 10;

(z)
Optionee” means an Eligible Person to whom an Option has been granted;

(aa)
Person” means a natural person, company, government or political subdivision or agency of a government; and where two or more Persons act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of an issuer, such syndicate or group shall be deemed to be a Person;

(bb)
Plan” means this Stock Option Plan of the Company;

(cc)
Qualified Successor” means a person who is entitled to ownership of an Option upon the death of an Optionee, pursuant to a will or the applicable laws of descent and distribution upon death;

(dd)
Related Company” shall mean a company which is an Affiliate of the Company;

(ee)
Shares” means the common shares in the capital of the Company as constituted on the Date of Grant, adjusted from time to time in accordance with the provisions of Section 10; and

(ff)
Term” means the period of time during which an Option may be exercised.



3. ADMINISTRATION

3.1 Board or Committee – The Plan shall be administered by the Board or by a Committee appointed in accordance with Section 3.2.

3.2 Appointment of Committee – The Board may at any time appoint a Committee to administer the Plan on behalf of the Board in accordance with such terms and conditions as the Board may prescribe, consistent with this Plan. Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and appoint new members in their place, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan. In the absence of the appointment of a Committee by the Board, the Board shall administer the Plan.

3.3 Quorum and Voting – A majority of the members of the Committee shall constitute a quorum, and, subject to the limitations in this Section 3, all actions of the Committee shall require the affirmative vote of members who constitute a majority of such quorum. No member of the Committee who is a director to whom an Option may be granted may participate in the decision to grant such Option (but any such member may be counted in determining the existence of a quorum at any meeting of the Committee in which action is to be taken with respect to the granting of an Option to him).

3.4 Powers of Board and Committee – The Board shall from time to time authorize and approve the grant by the Company of Options under this Plan, and any Committee appointed under Section 3.2 shall have the authority to review the following matters in relation to the Plan and to make recommendations thereon to the Board;


(a)
administration of the Plan in accordance with its terms,


(b)
determination of all questions arising in connection with the administration, interpretation and application of the Plan, including all questions relating to the value of the Shares,


(c)
correction of any defect, supply of any information or reconciliation of any inconsistency in the Plan in such manner and to such extent as shall be deemed necessary or advisable to carry out the purposes of the Plan,


(d)
prescription, amendment and rescission of the rules and regulations relating to the administration of the Plan;


(e)
determination of the duration and purpose of leaves of absence from employment which may be granted to Optionees without constituting a termination of employment for purposes of the Plan,


(f)
with respect to the granting of Options:


(i)
determination of the employees, officers, directors or consultants to whom Options will be granted, based on the eligibility criteria set out in this Plan,


(ii)
determination of the terms and provisions of the Option Agreement which shall be entered into with each Optionee (which need not be identical with the terms of any other Option Agreement) and which shall not be inconsistent with the terms of this Plan,


(iii)
amendment of the terms and provisions of an Option Agreement provided the Board obtains:

 (A)        the consent of the Optionee, and



(B)
if required, the approval of any stock exchange on which the Shares are listed,
 


(iv)
determination of when Options will be granted,


(v)
determination of the number of Shares subject to each Option, and


(vi)
determination of the vesting schedule, if any, for the exercise of each Option, and

(g)          other determinations necessary or advisable for administration of the Plan.

3.5 Obtain Approvals – The Board will seek to obtain any regulatory, Exchange or shareholder approvals which may be required pursuant to applicable securities laws or Exchange rules, if applicable.

3.6 Administration by Committee – The Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan. In addition, the Committee’s administration of the Plan shall in all respects be consistent with the Exchange policies and rules.

4. ELIGIBILITY

4.1 Eligibility for Options – Options may be granted to any Eligible Person.

4.2 Insider Eligibility for Options – Notwithstanding Section 4.1, if the Shares are listed only on the CSE, grants of Options to Insiders shall be subject to the policies of the CSE.

4.3 No Violation of Securities Laws – No Option shall be granted to any Optionee unless the Committee has determined that the grant of such Option and the exercise thereof by the Optionee will not violate the securities law of the jurisdiction in which the Optionee resides.

5. SHARES SUBJECT TO THE PLAN

5.1 Number of Shares – The maximum number of Shares issuable from time to time under the Plan is that number of Shares as is equal to 10% of the number of issued Shares at the Date of Grant of an Option. The maximum number of Shares issuable under the Plan shall be adjusted, where necessary, to take account of the events referred to in Section 10.

5.2 Expiry of Option – If an Option expires or terminates for any reason without having been exercised in full, the unpurchased Shares subject thereto shall again be available for the purposes of the Plan.

5.3 Reservation of Shares – The Company will at all times reserve for issuance and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

6. OPTION TERMS

6.1 Option Agreement – Each Option granted to an Optionee shall be confirmed by the execution and delivery of an Option Agreement and the Board shall specify the following terms in each such Option Agreement:


(a)
the number of Shares subject to option pursuant to such Option, subject to the following limitations if the Shares are listed only on the CSE:


(i)
the number of Shares reserved for issuance pursuant to Options to any one Optionee shall not exceed 5% of the issued Shares in any 12-month period (unless the Company is designated as a “Tier 1” listed company by the CSE and has obtained Disinterested Shareholder Approval to exceed this number),




(ii)
the number of Shares reserved for issuance pursuant to Options to any one Consultant shall not exceed 2% of the issued Shares in any 12-month period, and


(iii)
the aggregate number of Shares reserved for issuance pursuant to Options to Employees and Management Company Employees conducting Investor Relations Activities shall not exceed 2% of the issued Shares in any 12-month period;


(b)
the Date of Grant;


(c)
the Term shall in no event be greater than five years following the Date of Grant;


(d)
the Option Price, provided that the Option Price shall not be less than the Fair Market Value of the Shares on the Date of Grant;


(e)
subject to Section 6.2 below, any vesting schedule upon which the exercise of an Option is contingent;


(f)
if the Optionee is an Employee, Consultant or Management Company Employee, a representation by the Company and the Optionee that the Optionee is a bona fide Employee, Consultant or Management Company Employee, as the case may be, of the Company or a Related Company; and


(g)
such other terms and conditions as the Board deems advisable and are consistent with the purposes of this Plan.

6.2 Vesting Schedule – The Board, as applicable, shall have complete discretion to set the terms of any vesting schedule of each Option granted, including, without limitation, discretion to:


(a)
permit partial vesting in stated percentage amounts based on the Term of such Option; and


(b)
permit full vesting after a stated period of time has passed from the Date of Grant.

6.3 Amendments to Options – Amendments to the terms of previously granted Options are subject to regulatory approval, if required. If required by the Exchange, Disinterested Shareholder Approval shall be required for any reduction in the Option Price of a previously granted Option if the Optionee is an Insider of the Company at the time of the proposed reduction in the Option Price.

6.4 Uniformity – Except as expressly provided herein, nothing contained in this Plan shall require that the terms and conditions of Options granted under the Plan be uniform.

7. EXERCISE OF OPTION

7.1 Method of Exercise – Subject to any limitations or conditions imposed upon an Optionee pursuant to the Option Agreement or Section 6 hereof, an Optionee may exercise an Option by giving written notice thereof, specifying the number of Shares in respect of which the Option is exercised, to the Company at its principal place of business at any time after the Date of Grant until 4:00 p.m. (Toronto time) on the last day of the Term, such notice to be accompanied by full payment of the aggregate Option Price to the extent the Option is so exercised. Such payment shall be in lawful money (Canadian funds) by cash, cheque, bank draft or wire transfer. Payment by cheque made payable to the Company in the amount of the aggregate Option Price shall constitute payment of such Option Price unless the cheque is not honoured upon presentation, in which case the Option shall not have been validly exercised.


7.2 Issuance of Certificates – Not later than the third business day after exercise of an Option in accordance with Section 7.1, the Company shall issue and deliver to the Optionee a certificate or certificates evidencing the Shares with respect to which the Option has been exercised. Until the issuance of such certificate or certificates, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to such Shares, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the certificate is issued, except as provided by Section 10 hereof.

7.3 Compliance with U.S. Securities Laws – As a condition to the exercise of an Option, the Board may require the Optionee to represent and warrant in writing at the time of such exercise that the Shares are being purchased only for investment and without any then-present intention to sell or distribute such Shares. At the option of the Board, a stop-transfer order against such Shares may be placed on the stock books and records of the Company and a legend, indicating that the stock may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided stating that such transfer is not in violation of any applicable law or regulation, may be stamped on the certificates representing such Shares in order to assure an exemption from registration. The Board may also require such other documentation as may from time to time be necessary to comply with United States’ federal and state securities laws. The Company has no obligation to undertake registration of Options or the Shares issuable upon the exercise of the Options.

8. TRANSFERABILITY OF OPTIONS

8.1 Non-Transferable – Except as permitted by applicable securities laws and the policies of the Exchange, and as provided otherwise in this Section 8, Options are non-assignable and non-transferable.

8.2 Death of Optionee – Subject to Section 8.3, if the employment of an Optionee as an Employee of, or the services of a Consultant providing services to, the Company or any Related Company, or the employment of an Optionee as a Management Company Employee, or the position of the Optionee as a director or senior officer of the Company or any Related Company, terminates as a result of such Optionee’s death, any Options held by such Optionee shall pass to the Qualified Successor of the Optionee and shall be exercisable by such Qualified Successor until the earlier of a period of not more than one year following the date of such death and the expiry of the Term of the Option.

8.3 Disability of Optionee – If the employment of an Optionee as an Employee of, or the services of a Consultant providing services to, the Company or any Related Company, or the employment of an Optionee as a Management Company Employee, or the position of the Optionee as a director or senior officer of the Company or any Related Company, is terminated by reason of such Optionee’s Disability, any Options held by such Optionee that could have been exercised immediately prior to such termination of employment or service shall be exercisable by such Optionee, or by his Guardian, for a period of 30 days following the termination of employment or service of such Optionee. If such Optionee dies within that 30-day period, any Option held by such Optionee that could have been exercised immediately prior to his or her death shall pass to the Qualified Successor of such Optionee, and shall be exercisable by the Qualified Successor until the earlier of a period of 30 days following the death of such Optionee and the expiry of the Term of the Option.

8.4 Vesting – Options held by a Qualified Successor or exercisable by a Guardian shall, during the period prior to their termination, continue to vest in accordance with any vesting schedule to which such Options are subject.

8.5 Deemed Non-Interruption of Employment – Employment shall be deemed to continue intact during any military or sick leave or other bona fide leave of absence if the period of such leave does not exceed 90 days or, if longer, for so long as the Optionee’s right to reemployment with the Company or any Related Company is guaranteed either by statute or by contract. If the period of such leave exceeds 90 days and the Optionee’s reemployment is not so guaranteed, then the Optionee’s employment shall be deemed to have terminated on the ninety-first day of such leave.


9. TERMINATION OF OPTIONS

9.1 Termination of Options – To the extent not earlier exercised or terminated in accordance with Section 8, an Option shall terminate at the earliest of the following dates:


(a) the termination date specified for such Option in the Option Agreement;


(b)
where the Optionee’s position as an Employee, a Consultant, a director or a senior officer of the Company or any Related Company, or a Management Company Employee, is terminated for cause, the date of such termination for cause;


(c)
where the Optionee’s position as an Employee, a Consultant, a director or a senior officer of the Company or any Related Company, or a Management Company Employee terminates for a reason other than the Optionee’s Disability or death or for cause, not more than 90 days after such date of termination; PROVIDED that if an Optionee’s position changes from one of the said categories to another category, such change shall not constitute termination or cessation for the purpose of this Subsection 9.1(c); and


(d)
the date of any sale, transfer, assignment or hypothecation, or any attempted sale, transfer, assignment or hypothecation, of such Option in violation of Section 8.1.

9.2 Lapsed Options – If Options are surrendered, terminate or expire without being exercised in whole or in part, new Options may be granted covering the Shares not purchased under such lapsed Options. If an Option has been surrendered in connection with the regranting of a new Option to the same Optionee on different terms than the original Option granted to such Optionee, then, if required, the new Option is subject to approval of the Exchange.

9.3 Exclusion From Severance Allowance, Retirement Allowance or Termination Settlement – If the Optionee retires, resigns or is terminated from employment or engagement with the Company or any Related Company, the loss or limitation, if any, pursuant to the Option Agreement with respect to the right to purchase Option Shares which were not vested at that time or which, if vested, were cancelled, shall not give rise to any right to damages and shall not be included in the calculation of nor form any part of any severance allowance, retiring allowance or termination settlement of any kind whatsoever in respect of such Optionee.

10. ADJUSTMENTS TO OPTIONS

10.1     Alteration in Capital Structure – If there is any change in the Shares through or by means of a declaration of stock dividends of the Shares or consolidations, subdivisions or reclassifications of the Shares, or otherwise, the number of Shares available under the Plan, the Shares subject to any Option and the Option Price therefor shall be adjusted proportionately by the Board and, if required, approved by the Exchange, and such adjustment shall be effective and binding for all purposes of the Plan.

10.2   Effect of Amalgamation, Merger or Arrangement – If the Company amalgamates, merges or enters into a plan of arrangement with or into another corporation, any Shares receivable on the exercise of an Option shall be converted into the securities, property or cash which the Optionee would have received upon such amalgamation, merger or arrangement if the Optionee had exercised the Option immediately prior to the record date applicable to such amalgamation, merger or arrangement, and the exercise price shall be adjusted proportionately by the Board and such adjustment shall be binding for all purposes of the Plan.


10.3   Acceleration on Change in Control – Upon a Change in Control, all Options shall become immediately exercisable, notwithstanding any contingent vesting provisions to which such Options may have otherwise been subject.

10.4   Acceleration of Date of Exercise – Subject to the approval of the Exchange, if required, the Board shall have the right to accelerate the date of vesting of any portion of any Option which remains unvested.

10.5   Determinations to be Binding – If any questions arise at any time with respect to the Option Price or exercise price or number of Option Shares or other property deliverable upon exercise of an Option following an event referred to in this Section 10, such questions shall be conclusively determined by the Board, whose decisions shall be final and binding.

10.6   Effect of a Take-Over – If a bona fide offer (the “Offer”) for Shares is made to an Optionee or to shareholders generally or to a class of shareholders which includes the Optionee, which Offer constitutes a take-over bid within the meaning of section 89 of the Act, the Company shall, immediately upon receipt of notice of the Offer, notify each Optionee of full particulars of the Offer, whereupon any Option held by an Optionee may be exercised in whole or in part, notwithstanding any contingent vesting provisions to which such Options may have otherwise been subject, by the Optionee so as to permit the Optionee to tender the Shares received upon such exercise (the “Optioned Shares”) to the Offer. If:

 (a)         the Offer is not completed within the time specified therein; or


(b)
all of the Optioned Shares tendered by the Optionee pursuant to the Offer are not taken up and paid for by the offeror pursuant thereto;

the Optioned Shares or, in the case of clause (b) above, the Optioned Shares that are not taken up and paid for, may be returned by the Optionee to the Company and reinstated as authorized but unissued Shares and with respect to such returned Optioned Shares, the Option shall be reinstated as if it had not been exercised. If any Optioned Shares are returned to the Company under this Section, the Company shall refund to the Optionee any Option Price paid for such Optioned Shares.

11. APPROVAL, TERMINATION AND AMENDMENT OF PLAN

11.1   Shareholder Approval – This Plan, if the Shares are listed only on the CSE, is subject to approval by the Company’s shareholders on a yearly basis at the Company’s next ensuing annual general meeting.

11.2   Power of Board to Terminate or Amend Plan – Subject to the approval of the Exchange, if required, the Board may terminate, suspend or discontinue the Plan at any time or amend or revise the terms of the Plan; provided, however, that, except as provided in Section 10, the Board may not do any of the following without obtaining, within 12 months either before or after the Board’s adoption of a resolution authorizing such action, approval by the Company’s shareholders at a meeting duly held in accordance with the applicable corporate laws:

(a) materially modify the requirements as to eligibility for participation in the Plan; or

(b) materially increase the benefits accruing to participants under the Plan;

however, the Board may amend the terms of the Plan to comply with the requirements of any applicable regulatory authority, or as a result of changes in the policies of the Exchange relating to director, officer and employee stock options, without obtaining the approval of the Company’s shareholders.

11.3   No Grant During Suspension of Plan – No Option may be granted during any suspension, or after termination, of the Plan. Amendment, suspension or termination of the Plan shall not, without the consent of the Optionee, alter or impair any rights or obligations under any Option previously granted.


12. CONDITIONS PRECEDENT TO ISSUANCE OF SHARES

12.1   Compliance with Laws – Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such shares shall comply with all relevant provisions of law, including, without limitation, any applicable United States’ state securities laws, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations thereunder and the requirements of any Exchange or automated interdealer quotation system of a registered national securities association upon which such Shares may then be listed or quoted, and such issuance shall be further subject to the approval of counsel for the Company with respect to such compliance, including the availability of an exemption from registration for the issuance and sale of such Shares. The inability of the Company to obtain from any regulatory body the authority deemed by the Company to be necessary for the lawful issuance and sale of any Shares under this Plan, or the unavailability of an exemption from registration for the issuance and sale of any Shares under this Plan, shall relieve the Company of any liability with respect to the non-issuance or sale of such Shares other than with respect to a refund of any Option Price paid.

13. USE OF PROCEEDS

13.1   Use of Proceeds – Proceeds from the sale of Shares pursuant to the Options granted and exercised under the Plan shall constitute general funds of the Company and shall be used for general corporate purposes, or as the Board otherwise determines.

14. NOTICES

14.1   Notices – All notices, requests, demands and other communications required or permitted to be given under this Plan and the Options granted under this Plan shall be in writing and shall be either delivered personally to the party to whom notice is to be given, in which case notice shall be deemed to have been duly given on the date of such personal delivery; telecopied, in which case notice shall be deemed to have been duly given on the date the telecopy is sent; or mailed to the party to whom notice is to be given, by first class mail, registered or certified, return receipt requested, postage prepaid, and addressed to the party at his or its most recent known address, in which case such notice shall be deemed to have been duly given on the tenth postal delivery day following the date of such mailing.

15. MISCELLANEOUS PROVISIONS

15.1   No Obligations to Exercise – Optionees shall be under no obligation to exercise Options granted under this Plan.

15.2   No Obligation to Retain Optionee – Nothing contained in this Plan shall obligate the Company or any Related Company to retain an Optionee as an employee, officer, director or consultant for any period, nor shall this Plan interfere in any way with the right of the Company or any Related Company to reduce such Optionee’s compensation.

15.3   Binding Agreement – The provisions of this Plan and of each Option Agreement with an Optionee shall be binding upon such Optionee and the Qualified Successor or Guardian of such Optionee.

15.4   Use of Terms – Where the context so requires, references herein to the singular shall include the plural, and vice versa, and references to a particular gender shall include either or both genders.

15.5   Headings – The headings used in this Plan are for convenience of reference only and shall not in any way affect or be used in interpreting any of the provisions of this Plan.

15.6   No Representation or Warranty – The Company makes no representation or warranty as to the future value of any Shares issued in accordance with the provisions of this Plan.


15.7   Income Taxes – As a condition of and prior to participation in the Plan any Optionee shall on request authorize the Company in writing to withhold from any remuneration otherwise payable to such Optionee any amounts required by any taxing authority to be withheld for taxes of any kind as a consequence of such Optionee’s participation in the Plan.

15.8   Compliance with Applicable Law – If any provision of the Plan or any Option Agreement contravenes any law or any order, policy, by-law or regulation of any regulatory body or stock exchange or over the counter market having authority over the Company or the Plan, then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

15.9   Conflict – In the event of any conflict between the provisions of this Plan and an Option Agreement, the provisions of this Plan shall govern.

15.10    Governing Law – This Plan and each Option Agreement issued pursuant to this Plan shall be governed by the laws of the Province of Ontario.

15.11    Time of Essence – Time is of the essence of this Plan and of each Option Agreement. No extension of time will be deemed to be, or to operate as, a waiver of the essentiality of time.

15.12       Entire Agreement – This Plan and the Option Agreement sets out the entire agreement between the Company and the Optionees relative to the subject matter hereof and supersedes all prior agreements, undertakings and understandings, whether oral or written.

16. EFFECTIVE DATE OF PLAN

16.1   Effective Date of Plan – This Plan shall be effective on the day of its approval by the  shareholders of the Company.




FLORA GROWTH CORP.
STOCK OPTION PLAN - OPTION AGREEMENT
This Option Agreement is entered into between Flora Growth Corp. (the "Company") and the Optionee named below pursuant to the Stock Option Plan (the "Plan"), a copy of which is attached hereto, and confirms that:
1.
on ________________ (the "Grant Date");
2.
_______________________ (the "Optionee");
3.
was granted the option (the "Option") to purchase ____________________ Common Shares (the "Option Shares") of the Company;
4.
for the price of ______________ per share (the "Option Price");
5.
which shall subject, be exercisable ("Vested") as follows:
Options to immediately, with all share certificates to bear the following legend, if applicable:
UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (i) •, AND (ii) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY IN CANADA.
6.
terminating on ______________________ unless terminated earlier in accordance with Section 9 of the Plan (the "Expiry Date");
all on the terms and subject to the conditions set out in the Plan.  For greater certainty, once Option Shares have become Vested, they continue to be exercisable until the termination or cancellation thereof as provided in this Option Agreement and the Plan.
By signing this Option Agreement, the Optionee acknowledges that the Optionee has read and understands the Plan and agrees to the terms and conditions of the Plan and this Option Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Option Agreement as of the • day of •, 2019.
FLORA GROWTH CORP.
Per:  
 
 

  
 Authorized Signatory   OPTIONEE
   
 
Witness:
     



SHARE PURCHASE AGREEMENT
This share purchase agreement (the “Agreement”) is executed on July 16, 2019 (the “Signing Date”), between:
On the one hand, GUILLERMO ANDRES RAMIREZ MARTINEZ (“Guillermo”), GUILLERMO RAMIREZ CABRALES (Cabrales”) and OSCAR MAURICIO FRANCO ULLOA, an individual residing at  (“Oscar”)
(Guillermo, Cabrales and Oscar are hereinafter collectively referred to as the “Vendor”)
and
On the other hand, FLORA GROWTH CORP., organized and existing under the laws of the Province of Ontario,  identified with identification number 002685552 (the “Purchaser”).
Purchaser and Vendor may be referred to herein, collectively, as the “Parties” and individually as a “Party”.
RECITALS:
Whereas, Vendor owns 100% (on a fully diluted basis) of of the subscribed capital in Cosechemos Ya S.A.S, (the “Company” a sociedad por acciones simplificada, organized and existing under the Laws of the Republic of Colombia which is comprised of 5,000 shares of the Company;

And Whereas, Vendor has the rights and abilities and wishes to sell 4,500 shares of the Company (the “Purchased Shares”) to Purchaser, and Purchaser wishes to acquire the Purchased Shares, subject to the terms and conditions established in this Agreement; and

And Whereas following the transfer of the Purchased Shares to the Purchaser pursuant to the terms and conditions herein, the Purchaser shall own 4,500 shares of the Company, Guillermo shall own 63 shares of the Company, Cabrales shall own 187 shares of the Company and Oscar shall own 250 shares of the Company.

THEREFORE, pursuant to the foregoing Recitals, the Parties have agreed to execute this Agreement, in the terms set forth in the following provisions:

2

ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1
Definitions
Whenever used in this Agreement, the following words and terms have the meanings set out below:
Accounting Rules” means the International Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by Colombia applicable to all companies reporting under the International Financial Reporting Standards.
Accounts Payable” means amounts owing by the Company or any of the Subsidiaries to any Person as of the Closing Time, which are incurred in connection with the purchase of goods or services in the ordinary course of business and in accordance with the terms of this Agreement;
Accounts Receivable” means accounts receivable, bills receivable, trade accounts, book debts and insurance claims recorded as receivable in the Books and Records and other amounts due or deemed to be due to the Company or any of the Subsidiaries including refunds and rebates receivable;
Accrued Liabilities” means ordinarily recurring operating expenses of the Company and the Subsidiaries incurred as of the Closing Time but which are not yet due and payable as of the Closing Time and claims against the Company and the Subsidiaries that are increasing with the passage of time or receipt of goods or services but are not yet due and payable as of the Closing Time, including accruals for vacation pay, customer rebates and allowances for product returns;
Affiliate” of any Person means, at the time such determination is being made, any other Person controlling, controlled by or under common control with such first Person, in each case, whether directly or indirectly, and “control” and any derivation thereof means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities or otherwise;
Agreement” means this Share Purchase Agreement, including all schedules, and all amendments or restatements, as permitted, and references to “Article” or “Section” mean the specified Article or Section of this Agreement;
Anticorruption Laws” means, as modified from time to time, the Anticorruption Statute of the Republic of Colombia (Law 1474/2011) and any other Applicable Laws that prohibit corruption and/or money laundering in any jurisdiction where Purchaser, Vendor or the Company, as applicable, has or has had a business presence and/or does or has done material business, including the Republic of Colombia.

3
Applicable Law” means, regarding any Person, act, legal business, event or circumstance, any law, statute, decree, code, rule, order and any other requirement or rule of law, of a national, federal, departmental, municipal and/or district order, or any other level, local, foreign or supranational, issued by any Governmental Authority, applicable to such Person (including its business and assets), act, legal business, event or circumstance in any jurisdiction, as amended or replaced from time to time.
Appurtenances” means privileges, rights, easements and appurtenances both at law and equity belonging to or for the benefit of Real Property, including means of access between Real Property and a public way, rights in respect of or for any other uses upon which the present use is dependent (such as pipelines, cables, railway sidings) and rights existing in and to any streets, alleys, passages and other rights-of-way;
arm’s length” has the meaning that it has for purposes of the Income Tax Act (Canada);
Balance Sheet” means the consolidated balance sheet of the Company and the Subsidiaries as at December 31, 2018, forming part of the Financial Statements;
Benefit Plans” means plans, arrangements, agreements, programs, policies, practices or undertakings, whether oral or written, formal or informal, funded or unfunded, insured or uninsured, registered or unregistered to which the Company or any of the Subsidiaries is a party or bound or in which the Employees participate or under which the Company or any of the Subsidiaries has, or will have, any liability or contingent liability, or pursuant to which payments are made, or benefits are provided to, or an entitlement to payments or benefits may arise with respect to any of its Employees or former employees, directors or officers, individuals working on contract with the Company or any of the Subsidiaries or other individuals providing services to any of them of a kind normally provided by employees (or any spouses, dependants, survivors or beneficiaries of any such persons);
Books and Records” means books and records of the Company and the Subsidiaries or of the Vendor relating to the Company or any of the Subsidiaries, including financial, corporate, operations and sales books, records, books of account, sales and purchase records, lists of suppliers and customers, formulae, business reports, plans and projections and all other documents, surveys, plans, files, records, assessments, correspondence, and other data and information, financial or otherwise, including all data, information and databases stored on computer-related or other electronic media;

4
Business Day” means any day, other than a Saturday or Sunday, on which the Royal Bank of Canada in Toronto, Ontario is open for commercial banking business during normal banking hours;
Claims” includes claims, demands, complaints, grievances, actions, applications, suits, causes of action, Orders, charges, indictments, prosecutions, informations or other similar processes, assessments or reassessments, judgments, debts, liabilities, penalties, fines, expenses, costs, damages or losses, contingent or otherwise, whether liquidated or unliquidated, matured or unmatured, disputed or undisputed, contractual, legal or equitable, including loss of value, professional fees, including fees and disbursements of legal counsel on a full indemnity basis, and all costs incurred in investigating or pursuing any of the foregoing or any proceeding relating to any of the foregoing;
Closing” means the completion of the sale to and purchase by the Purchaser of the Purchased Shares under this Agreement;
Closing Date” means July 31, 2019 or such other date as the Parties may agree in writing as the date upon which the Closing shall take place, provided that the Closing Date shall be no later than August 30, 2019;
Closing Time” means 10:00 a.m. (Toronto time), on the Closing Date or such other time on such date as the Parties may agree in writing as the time at which the Closing shall take place;
Collective Agreements” means collective agreements (including expired collective agreements which have not been renewed) and related documents including benefit agreements, letters of understanding, letters of intent and other written communications (including arbitration awards) by which the Company or any of the Subsidiaries is bound or which impose any obligations upon the Company or any of the Subsidiaries or set out the understanding of the parties or an interpretation with respect to the meaning of any provisions of such collective agreements;
 “Contracts” means contracts, licences, leases, agreements, obligations, promises, undertakings, understandings, arrangements, documents, commitments, entitlements or engagements to which the Company or any of the Subsidiaries is a party or by which any of them are bound or under which the Company or any of the Subsidiaries has, or will have, any liability or contingent liability (in each case, whether written or oral, express or implied), and includes any quotations, orders, proposals or tenders which remain open for acceptance and warranties and guarantees;

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Employees” means individuals employed by the Company or any of the Subsidiaries on a full-time, part-time or temporary basis, including those employees on disability leave, parental leave or other absence;
Employment Contracts” means Contracts, other than Benefit Plans, whether oral or written, relating to an Employee, including any communication or practice relating to an Employee which imposes any obligation on the Company or any of the Subsidiaries;
Encumbrances” means pledges, liens, charges, security interests, leases, title retention agreements, mortgages, restrictions, developments or similar agreements, easements, rights-of-way, title defects, options or adverse claims or encumbrances of any kind or character whatsoever;
Environment” means the environment and natural environment as defined in any Environmental Laws and includes indoor air, and any living things;
Environmental Approvals” means permits, certificates, licences, authorizations, consents, agreements, instructions, directions, notices, registrations, approvals or other rights made, issued, granted, conferred or required by a Governmental Authority pursuant to any Environmental Law relating to the operations, business or assets of the Company or any of the Subsidiaries;
Environmental Laws” means Laws relating to the Environment and includes Laws relating to any sewer system and to the storage, generation, use, handling, manufacture, processing, labelling, advertising, sale, display, transportation, treatment, reuse, recycling, Release and disposal of Hazardous Substances;
“Environmental Orders” means Orders issued, filed, imposed or threatened by any Governmental Authority pursuant to any Environmental Laws and include certificates of property use and Orders requiring investigation, assessment, monitoring, managing, controlling, treatment, removal, excavation or remediation of any site or Hazardous Substance, or requiring that any Release or any other activity be reduced, modified, managed, controlled, stopped or eliminated or requiring any form of payment or co-operation be provided to any Governmental Authority;
Equipment Contracts” means Contracts relating to Tangible Personal Property and includes motor vehicle leases, equipment leases, leases of computer hardware and computer systems, conditional sales contracts, title retention agreements and other similar agreements;

6
Financial Statements” means the audited financial statements of the Company and the Subsidiaries for the fiscal year ended December 31, 2018, consisting of the Balance Sheet and the statements of earnings and retained earnings and cash flows and all notes thereto;
Governmental Authorities” means governments, regulatory authorities, governmental departments, agencies, commissions, bureaus, officials, ministers, Crown corporations, courts, bodies, boards, tribunals or dispute settlement panels or other law, rule or regulation-making organizations or entities:
(a)
having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or
(b)
exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power;
Governmental Authorizations” means authorizations, approvals, including Environmental Approvals, franchises, Orders, certificates, consents, directives, notices, licences, permits, variances, agreements, instructions, registrations or other rights issued to or required by the Company or any of the Subsidiaries by or from any Governmental Authority;
Hazardous Substances” means pollutants, contaminants, wastes of any nature, hazardous substances, hazardous materials, toxic substances, prohibited substances, dangerous substances or dangerous goods as defined, judicially interpreted or identified in any Environmental Laws including asbestos, asbestos-containing materials, polychlorinated biphenyls (PCBs) and mould;
Improvements” means plants, buildings, structures, fixtures, erections and improvements located on, over, under or upon the Real Property and mechanical, electrical, plumbing, heating and air-conditioning systems relating to the Real Property, including any of the foregoing under construction;
Indemnified Party” has the meaning given in Section 12.2;
Indemnifying Party” has the meaning given in Section 12.2;
Information Technology” means computer hardware, software in source code and object code form (including documentation, interfaces and development tools), websites for the Company or any of the Subsidiaries, databases, telecommunications equipment and facilities and other information technology systems owned, used or held by the Company or any of the Subsidiaries;

7
Intellectual Property” means intellectual property rights, whether registered or not, owned, used or held by the Company or any of the Subsidiaries, including:
(a)
trade-marks, trade dress, trade-names, business names and other indicia of origin, including those listed and described in Schedule 4.24;
(b)
copyrights, including the copyright registrations and applications listed and described in Schedule 4.24;
“Inventories” means items that are held by the Company or any of the Subsidiaries for sale, license, rental, lease or other distribution in the ordinary course of business, or are being produced for sale, or are to be consumed, directly or indirectly, in the production of goods or services to be available for sale, of every kind and nature and wheresoever situate including inventories of raw materials, finished goods and by-products and packaging materials;
JVSA” means the joint venture shareholders’ agreement that shall be signed by the Parties at the Closing Time, on the terms and conditions set out in Schedule “A”;
Lease Agreement” means the lease agreement entered by and among the Company, as lessee, and CI Gramaluz SCA , as lessor, with respect the real estate described in Schedule B.
Leased Real Property” means lands and/or premises which are used by the Company or any of the Subsidiaries and which are leased, subleased, licensed to or otherwise occupied by the Company or any of the Subsidiaries and the interest of the Company and the Subsidiaries in Improvements and Appurtenances;
Lien” means any bond in the terms of article 65 of the Colombian Civil Code, any mortgage, encumbrance, pledge with or without tenancy, surety, any security in terms of Law 1676/2013 of the Republic of Colombia or similar, or any other act or contract which purpose or effect is constituting a limitation or burden to secure an obligation.
Loss” means with respect to a Person all losses and damages pursuant to articles 1613 and 1614 of the Colombian Civil Code, penalties, fines, costs and expenses (including amounts paid in settlement, interest, court costs, costs of investigations, reasonable fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation).

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Material Adverse Effect” means a change, effect or circumstance that, when considered either individually or in the aggregate together with all other adverse changes, effects or circumstances with respect to which such phrase is used in this Agreement, is materially adverse to, or could reasonably be expected to have a material adverse effect on, the financial condition or results of operations or prospects of the Company or any of the Subsidiaries;
Material Contracts” means Contracts (i) involving aggregate payments to or by the Company or any of the Subsidiaries in excess of $10,000, (ii) involving rights or obligations of the Company or any of the Subsidiaries that may reasonably extend beyond one year and which do not terminate or cannot be terminated by the Company or any of the Subsidiaries without penalty on less than six months notice, (iii) which are outside the ordinary course of business, (iv) which restrict in any way the business or activities of the Company or any of the Subsidiaries;
Notice” has the meaning given in Section 11.3;
Orders” means orders, injunctions, judgments, administrative complaints, decrees, rulings, awards, assessments, directions, instructions, penalties or sanctions issued, filed or imposed by any Governmental Authority or arbitrator, including Environmental Orders;
Parties” means the Vendor and the Purchaser collectively, and “Party” means any one of them;
Pension Plans” means Benefit Plans providing pensions, superannuation benefits or retirement savings including pension plans, top up pensions or supplemental pensions, registered retirement savings plans, registered pension plans and retirement compensation arrangements;
Permitted Encumbrances” means:
i.
Inchoate statutory liens for Taxes, assessments, governmental or utility charges or levies not at due as at the Closing Date.
ii.
Rights of equipment lessors under Equipment Contracts provided the terms of such Equipment Contracts have been fully performed to the Closing Date.
iii.
Any privilege in favour of any lessor, licensor or permitter for rent to become due or for other obligations or acts, the performance of which is required under Contracts so long as the payment of or the performance of such other obligation or act is not delinquent and provided that such liens or privileges do not materially adversely affect the use or value of the assets affected thereby.

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Person” means any individual, sole proprietorship, partnership, firm, entity, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, Governmental Authority, and where the context requires any of the foregoing when they are acting as trustee, executor, administrator or other legal representative;
Personal Information” means information in the possession or under the control of the Company or any of the Subsidiaries about an identifiable individual;
Purchase Price” has the meaning given in Section 3.1;
Purchased Shares” means 4,500 shares of the Company;
Purchased Shares Purchase Price” has the meaning given in Section 3.1;
Purchaser Indemnified Parties” has the meaning given in Section 12.1;
Real Property Leases” means Contracts pursuant to which the Company or any of the Subsidiaries uses or occupies the Leased Real Property, including all rights to related Improvements and Appurtenances;
Release” has the meaning prescribed in any Environmental Laws and includes any release, spill, leak, pumping, addition, pouring, emission, emptying, discharge, injection, escape, leaching, disposal, dumping, deposit, spraying, burial, abandonment, incineration, seepage, placement or introduction, whether accidental or intentional;
Restricted Right” means any Contract or Governmental Authorization which by its terms requires consent or approval of the other party or parties thereto or the issuer for completion of the transactions contemplated by this Agreement or in respect of which the completion of the transactions contemplated by this Agreement will increase the obligations or decrease the rights or entitlements of the Company or any of the Subsidiaries under such Contract or Governmental Authorization;
Subsidiaries” means corporations in which the Company holds more than 50% of the shares or voting rights, directly or indirectly;

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Tangible Personal Property” means machinery, equipment, furniture, furnishings, office equipment, computer hardware, supplies, materials, vehicles, material handling equipment, implements, parts, tools, jigs, dies, moulds, patterns, tooling and spare parts and tangible assets (other than Inventory) owned or used or held by the Company or any of the Subsidiaries, including (i) any of the foregoing which are in storage or in transit; (ii) other tangible personal property of the Company or any of the Subsidiaries whether located in or on the Leased Real Property or elsewhere; (iii) any of the foregoing which may be attached to the Leased Real Property;
Tax Returns” includes all returns, reports, declarations, elections, notices, filings, forms, statements and other documents (whether in tangible, electronic or other form) and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared, filed or required to be made, prepared or filed by Law in respect of Taxes;
Taxes” includes any taxes, duties, fees, premiums, assessments, imposts, levies and other charges of any kind whatsoever imposed by any Governmental Authority, including all interest, penalties, fines, additions to tax or other additional amounts imposed by any Governmental Authority in respect thereof, and including those levied on, or measured by, or referred to as, income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, stamp, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping, all licence, franchise and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions;
Technical Information” means know-how and related technical knowledge owned, used or held by the Company or any of the Subsidiaries, including:
(a)
trade secrets, formulations, confidential information and other proprietary know-how;
(b)
public information and non-proprietary know-how;
(c)
information of a financial or business nature regardless of its form;
(d)
uniform resource locators, domain names, telephone, telecopy, internet protocol and email addresses; and
Technology” means Intellectual Property, Technical Information and Information Technology;

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Union” means an organization of employees formed for purposes that include the regulation of relations between employees and employers and includes a provincial, territorial, national or international union, a certified council of unions, a designated or certified employee bargaining agency, and any organization which has been declared a union pursuant to applicable labour relations legislation or which may qualify as a Union;
1.2
Certain Rules of Interpretation
In this Agreement:
(a)
Consent – Whenever a provision of this Agreement requires an approval or consent and such approval or consent is not delivered within the applicable time limit, then, unless otherwise specified, the Party whose consent or approval is required shall be conclusively deemed to have withheld its approval or consent.
(b)
Currency – Unless otherwise specified, all references to money amounts are to lawful currency of the United States.
(c)
Governing Law – This Agreement is a contract made under and shall be governed by and construed in accordance with Colombian Laws.
(d)
Headings – Headings of Articles and Sections are inserted for convenience of reference only and do not affect the construction or interpretation of this Agreement.
(e)
Including – Where the word “including” or “includes” is used in this Agreement, it means “including (or includes) without limitation”.
(f)
No Strict Construction – The language used in this Agreement is the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(g)
Number and Gender – Unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders.
(h)
Severability – If, in any jurisdiction, any provision of this Agreement or its application to any Party or circumstance is restricted, prohibited or unenforceable, such provision shall, as to such jurisdiction, be ineffective only to the extent of such restriction, prohibition or unenforceability without invalidating the remaining provisions of this Agreement and without affecting the validity or enforceability of such provision in any other jurisdiction or without affecting its application to other Parties or circumstances.

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(i)
Statutory references – A reference to a statute includes all regulations and rules made pursuant to such statute and, unless otherwise specified, the provisions of any statute, regulation or rule which amends, supplements or supersedes any such statute, regulation or rule.
(j)
Time – Time is of the essence in the performance of the Parties’ respective obligations.
(k)
Time Periods – Unless otherwise specified, time periods within or following which any payment is to be made or act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends and by extending the period to the next Business Day following if the last day of the period is not a Business Day.
1.3
Knowledge
Any reference to the knowledge of any Party means to the best of the knowledge, information and belief of such Party after reviewing all relevant records and making due inquiries regarding the relevant matter of all relevant directors, officers and employees of such Party and, in the case of the knowledge of the Vendor, the relevant senior managers of the Company and any of the Subsidiaries.
1.4
Entire Agreement
This Agreement and the agreements and other documents required to be delivered pursuant to this Agreement, constitute the entire agreement between the Parties and set out all the covenants, promises, warranties, representations, conditions and agreements between the Parties in connection with the subject matter of this Agreement and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, pre-contractual or otherwise. There are no covenants, promises, warranties, representations, conditions, understandings or other agreements, whether oral or written, pre-contractual or otherwise, express, implied or collateral between the Parties in connection with the subject matter of this Agreement except as specifically set forth in this Agreement and any document required to be delivered pursuant to this Agreement.
1.5
Schedules
The schedules to this Agreement, listed below, are an integral part of this Agreement:

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ARTICLE 2
PURCHASE OF SHARES AND CLOSING
 
2.1
Purpose: Purchase of Shares
The purpose of this Agreement is (a) to determine the terms and conditions under which Purchaser will acquire the Purchased Shares from Vendor, and (b) establish other agreements between the Parties, related to, or due to, such purchase (the “Transaction”).
2.2
Purchase of Shares
Subject to the terms and conditions of this Agreement, on the Closing Date, in consideration for the payment of the Purchase Price, the representations, warranties, obligations and the other terms contained in this Agreement, Vendor shall transfer and deliver to Purchaser and Purchaser shall receive the Purchased Shares, free of any Lien.
2.3
Closing
The closing of the Transactions contemplated herein shall occur at 10:00 (am), local time, on the Closing Date.  The Closing shall take place at the Closing Time at the offices of the Purchaser located at 65 Queen Street West, Suite 800, Toronto, ON M5H 2M5, or at such other place as may be agreed upon by the Vendor and the Purchaser.
(a)
Actions and Deliverables of Vendor on the Closing Date
On or before the Closing Date (unless this Section provides that an action or delivery must occur specifically on the Closing Date), Vendor shall deliver to Purchaser:

(i)
the original certificates representing the Purchased Shares duly issued and the original shareholders log of the Company, evidencing the recording of the transfer of the Purchased Shares in favor of Purchaser;
(ii)
the original certificates representing the Purchased Shares owned by Vendor duly endorsed in favor of Purchaser, accompanied with a transfer letter instructing the legal representative of the relevant Company to register Purchaser as new owner of the Purchased Shares and to cancel the Share certificates in the name of Vendor;
(iii)
an executed version of the JVSA;

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(iv)
an executed version of the Lease Agreement,
(v)

(vi)
Vendor shall transfer to the Purchaser all of the Books and Records of the Company;
(vii)
a closing certificate issued by Vendor, which certifies that (i) the representations and warranties set forth in this Agreement are true and correct as of the Closing Date in all material respects, (ii) that Vendor has complied, in all material respects with all the terms of this Agreement that must be fulfilled on or before the Closing, and (c) that all Conditions Precedent to Purchase have been satisfied; and
(viii)
a waiver letter releasing the Company from any claims Vendor may have against the Company or any of its subsidiaries (provided that such waiver does not include claims expressly included in the Agreement).
(b)
Purchaser’s Actions and Deliverables at Closing Date
On or before the Closing Date (unless this Section provides that an action or delivery must occur specifically on the Closing Date Purchaser shall deliver to Vendor:

(i)
a copy of the applicable corporate resolutions evidencing that Purchaser has all required authorizations for the execution, delivery and performance of this Agreement, pursuant to its Corporate Documents;
(ii)
a public certificate of incorporation or existence, evidencing the existence of Purchaser and, as applicable, the name and identification document of the legal representatives of Purchaserr;
(iii)
a executed version of the JVSA; and
(iv)
the Closing Purchase Price by wire transfer of immediately available funds, to Vendor to the accounts instructed by Vendor.

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(c)
Simultaneous Activities on the Closing Date
All the activities to be carried out and the documents to be signed submitted by the Parties on the Closing Date will be deemed simultaneously executed, signed and delivered, and no activity shall be deemed carried out and no document will be signed or delivered until all have been executed, signed and delivered.

2.4
Assignment of Restricted Rights
If at Closing there are any Restricted Rights in respect of which necessary consents, approvals, waivers or modifications have not been obtained, then the Purchaser may waive the closing condition under Section 7.4 with respect to such Restricted Rights and instead elect to have the Vendor continue its efforts to obtain any necessary consents, approvals, waivers or modifications as set out below.
If the Purchaser waives the condition in Section 7.4 and elects to have the Vendor continue its efforts to obtain any necessary consents, approvals, waivers or modifications and the Closing occurs, the Vendor’s sole obligation shall be to:
(a)
apply for and use best efforts to obtain all consents, approvals, waivers or modifications acceptable to the Purchaser acting reasonably; and
(b)
take all such actions and do, or cause to be done, all such things at the request of the Purchaser as shall reasonably be necessary in order that the value and benefits of the applicable Restricted Rights shall be preserved and endure to the benefit of the Purchaser.
 
ARTICLE 3
PURCHASE PRICE
3.1
Purchase Price
At the Closing Time, the amount payable by the Purchaser for the Purchased Shares, exclusive of all applicable sales and transfer taxes, shall be paid to the Vendors as follows:
(a)
USD$80,000. The payment will be made by wire transfer of immediately available funds to the bank accounts indicated in writing by Vendor. Each Vendor shall a portion of this amount commensurate to their shareholders in the Company.

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3.2
Bonus Payments
Provided that both of the Vendors at such time remain shareholders of the Purchaser, the Purchaser shall owe the Vendors (as a one time payment) the additional sum of US$750,000, within 60 days after the Company earns net income in the amount of US$10.0 million. Each Vendor shall a portion of this amount commensurate to their shareholders in the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE VENDOR REGARDING THE COMPANY
Vendors represents and warrants that the following representations and warranties are true and correct on the Signing Date and will be true and correct on the Closing Date, unless they are made (expressly or due to their nature) with respect to a different date, in which case they will be true and correct on that date:
4.1
Incorporation and Corporate Power
The Company is duly organized and existing under the Applicable Laws of its place of incorporation. the Company has all corporate powers required to conduct the Business, to use and hold the right of ownership over its assets and to develop the activities that make up its corporate purpose as it has done to date, as permitted by Applicable Law and its Corporate Documents.
4.2
Registration
Neither the nature of the Company’s business nor the location or character of the assets owned or leased by the Company requires it to be registered, licensed or otherwise qualified as a foreign corporation in any jurisdiction other than in the Department of Santander where it is duly registered, licensed or otherwise qualified for such purpose.
4.3
Subsidiaries
The Company does not have any Subsidiaries.
4.4
Capitalization
The authorized and issued share capital of the Company consists of 5,000 shares.  All of the Purchased Shares have been duly and validly issued and are outstanding as fully paid and non-assessable shares.  No options, warrants or other rights to purchase shares or other securities of the Company and no securities or obligations convertible into or exchangeable for shares or other securities of the Company have been authorized or agreed to be issued or are outstanding.

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4.5
Absence of Conflicts
The Company is not a party to, bound or affected by or subject to any:

(a)
Contract;
(b)
charter or by-law; or
(c)
Laws or Governmental Authorizations;

that would be violated, breached by, or under which default would occur or an Encumbrance would be created, or in respect of which the obligations of the Company will increase or the rights or entitlements of the Company will decrease or any obligation on the part of the Company to give notice to any Governmental Authority will arise, as a result of the execution and delivery of, or the performance of obligations under, this Agreement or any other agreement to be entered into under the terms of this Agreement.  There has been no sale, assignment, subletting, licensing or granting of any rights in or other disposition of or in respect of any of the Company’s assets or any granting of any Contract or right capable of becoming an agreement or option for the purchase, assignment, subletting, licensing or granting of any rights in or other disposition of any of such assets other than pursuant to the provisions of, or as disclosed in, this Agreement or pursuant to purchase orders accepted by the Company in the ordinary course of business.
4.6
Financial Statements
The Financial Statements (i) were prepared in accordance with the Accounting Rules, applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (such adjustments not being material, either individually or in the aggregate)  and the absence of notes; (ii) are complete and correct in all respects; and (iii) fairly present the financial position, results of operations and cash flows of the Company, as of the dates and for the periods indicated therein, all in accordance with the Accounting Rules.
4.7
Absence of Undisclosed Liabilities
The Company has not incurred any liabilities or obligations (whether accrued, absolute, contingent or otherwise), which continue to be outstanding, except as disclosed in the Financial Statements.

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4.8
Absence of Changes and Unusual Transactions
Since the date of the Balance Sheet:
(a)
there has not been any change in the financial condition, operations or prospects of the Company other than changes in the ordinary course of business, none of which has a Material Adverse Effect;
(b)
there has not been any material change in the level or value of Inventories;
(c)
the Company has not transferred, assigned, sold or otherwise disposed of any of the assets shown or reflected in the Balance Sheet or cancelled any debts or entitlements except, in each case, in the ordinary course of business;
(d)
the Company has not incurred or assumed any obligation or liability (fixed or contingent), except those described in Section 4.8 and except unsecured current obligations and liabilities incurred in the ordinary course of business;
(e)
the Company has not discharged or satisfied any Encumbrance, or paid any obligation or liability (fixed or contingent) other than liabilities included in the Balance Sheet and liabilities incurred since the date of the Balance Sheet in the ordinary course of business;
(f)
the Company has not suffered an operating loss or any unusual or extraordinary loss except as is consistent with its financial performance over the 12 month period prior to the date hereof, waived or omitted to take any action in respect of any rights, or entered into any commitment or transaction not in the ordinary course of business where such loss, rights, commitment or transaction is or would be material in relation to the Company;
(g)
the Company has not granted any bonuses, whether monetary or otherwise, or made any general wage or salary increases in respect of its Employees, other than as provided for in the Collective Agreements, or changed the terms of employment for any Employee or entered into a written contract with any Employee;
(h)
the Company has not, directly or indirectly, engaged in any transaction, made any loan or entered into any arrangement with any officer, director, partner, shareholder, Employee (whether current or former or retired), consultant, independent contractor or agent of the Company;
(i)
the Company has not, except for Permitted Encumbrances, has created or permitted to exist any Encumbrance affecting any of its assets or property;

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(j)
the Company has not, directly or indirectly, declared or paid any dividends or declared or made any other payments or distributions on or in respect of any of its shares and has not, directly or indirectly, purchased or otherwise acquired any of its shares; and
(k)
the Company has not authorized, agreed or otherwise become committed to do any of the foregoing.
4.9
Non-Arm’s Length Transactions
No director or officer, former director or officer, shareholder or Employee of, or any other Person not dealing at arm’s length with the Company or the Vendor is engaged in any transaction or arrangement with or is a party to a Contract with, or has any indebtedness, liability or obligation to, the Company except for employment arrangements with Employees.
4.10
No Joint Venture Interests or Strategic Alliances
The Company is not a party to a strategic alliance or co-operative agreement or is a partner, beneficiary, trustee, co-tenant, joint-venturer or otherwise a participant in any partnership, trust, joint venture, co-tenancy or similar jointly owned business undertaking and the Company has no significant investment interests in any business owned or controlled by any third party.
4.11
Absence of Contingent Liabilities/Debts
The Company has not given or agreed to give, or is a party to or bound by, any guarantee, surety or indemnity in respect of indebtedness, or other obligations, of any Person, or any other commitment by which the Company is, or is contingently, responsible for such indebtedness or other obligations. The Company does not have any outstanding debt, other than as incurred in the normal course of business, or any outstanding loans to shareholders or third parties.
4.12
Major Suppliers and Customers
Schedule 4.12 sets forth a comprehensive listing of each supplier of goods and services to, and each customer of, the Company to whom the Company paid or billed in excess of $10,000 in the aggregate during the 12 month period ending December 31, 2018, together with, in each case, the amount so billed or paid.  Since the date hereof, there has been no termination or modification or change in the business relationship with any such supplier or customer.  To the knowledge of the Vendor, no such supplier or customer has any intention to change its relationship or the terms upon which it conducts business with the Company as a result of the transfer of the Purchased Shares as contemplated in this Agreement.

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4.13
Sufficiency of Assets
The Real Property Leases, Tangible Personal Property, Equipment Contracts, Appurtenances, Accounts Receivable, Governmental Authorizations, Improvements and Inventories of the Company are sufficient for the continued conduct of the Company’s businesses after the Closing in substantially the same manner as conducted prior to the Closing.
4.14
Title to Certain Assets
The Company is the sole legal and beneficial and (where its interests are registrable) the sole registered owner of all of its assets and interests in its assets, with good and valid title, free and clear of all Encumbrances other than Permitted Encumbrances.  Schedule 4.14 sets out a list of all of the fixed assets, excluding small wares, of the Company.
4.15
Condition of Certain Assets
The Tangible Personal Property is in good condition, repair and (where applicable) proper working order, having regard to its use and age and such assets have been properly and regularly maintained.
4.16
Location of the Assets
All of the assets of the Company are located at the Leased Real Property.
4.17
Inventories
All Inventories are valued on the books of the Company at cost, using the first in, first out method. The Inventory levels have been maintained at the amounts required for the operations of the Company as previously conducted and such Inventory levels are adequate for such operations.
4.18
Collectability of Accounts Receivable
The Accounts Receivable are good and collectible at the aggregate recorded amounts, except to the extent of any reserves and allowances for doubtful accounts provided for such Accounts Receivable in the Books and Records, and are not subject to any defence, counterclaim or set off.

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4.19
Business in Compliance with Law
The operations of the Company has been and are now conducted in compliance with all Aplicable Laws of each jurisdiction in which the Company operates, the Laws of which have been and are now applicable to the business or products of the Company.
4.20
Governmental Authorizations
Schedule 4.20  sets forth a complete list of the Governmental Authorizations and true and complete copies of such authorizations have been delivered or made available to the Purchaser.  The Governmental Authorizations listed in Schedule 4.20 are all the authorizations required by the Company to enable each of them to carry on its business in compliance with all Laws. Such Governmental Authorizations are in full force and effect in accordance with their terms, and no event has occurred or circumstance exists that (with or without notice or lapse of time) may constitute or result in a violation of any such Governmental Authorization or give rise to an obligation on the part of the Company to undertake or bear any cost.  No proceedings are pending or, to the knowledge of the Vendor, threatened, which could result in their revocation or limitation and all steps have been taken and filings made on a timely basis with respect to each Governmental Authorization and its renewal.
4.21
Restrictive Covenants
The Company is not a party to or bound or affected by any Contract: (a) limiting the freedom of the Company to compete in any line of business or any geographic area, acquire goods or services from any supplier, establish the prices at which it may sell any goods or services, sell goods or services to any customer or potential customer, or transfer or move any of its assets or operations; or (b) which has a Material Adverse Effect.
4.22
Technology
(a)
Schedule 4.22 (a) sets forth a complete list and a brief description of all Intellectual Property which has been registered, or for which applications for registration have been filed, by or on behalf of the Company.
(b)
Schedule 4.22 (b) sets forth a complete list and brief description of all Contracts and Encumbrances relating to any of the Technology.  Such Contracts are in full force and effect and no default exists on the part of the Company or, to the knowledge of the Company, on the part of the other parties thereto.

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4.23
Equipment Contracts
Schedule 4.23 sets forth a complete list of all Equipment Contracts together with a description of the Tangible Personal Property to which the Equipment Contracts relate.  The Equipment Contracts listed in Schedule 4.23 are all those used to earn the revenue shown on the Financial Statements.  All of the Equipment Contracts are in full force and effect unamended and there are no outstanding defaults (or events which would constitute a default with the passage of time or giving of notice or both) under the Equipment Contracts on the part of the Company, or on the part of any of the other parties thereto.  The interest of the Company under each of the Equipment Contracts is held free and clear of any Encumbrance, and all payments due under the Equipment Contracts have been duly and punctually paid.
4.24
Leased Real Property
(a)
Schedule 4.24 sets forth a complete list of the Leased Real Property and the agreements related to such Leased Real Property.
(b)
The Real Property Leases have not been altered or amended and are in full force and effect.  There are no Contracts between the landlord and tenant, or sublandlord and subtenant, or other relevant parties relating to the use and occupation of the Leased Real Property, other than as contained in the Real Property Leases.
(c)
There are no outstanding defaults (or events which would constitute a default with the passage of time or giving of notice or both) under the Real Property Leases on the part of the Company or on the part of any other party to such Real Property Leases.
(d)
All interests held by the Company as lessee or occupant under the Real Property Leases are free and clear of all Encumbrances other than Permitted Encumbrances.
(e)
The Company does not have an option, right of first refusal or other right relating to the Leased Real Property, other than as set out in the Real Property Leases.
(f)
The Company has not waived or omitted to take any action in respect of any material rights under any of the Real Property Leases.
4.25
Environmental Matters
(a)
The Company’s’ Business is and has been in compliance with all environmental Applicable Laws and Permits.

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(b)
The Company has not received any order, notice or other written communication from any Governmental Authority, relating to any violation or failure to comply with any environmental Applicable Law or Permit.
(c)
There are no ongoing, pending or, to the knowledge of the Vendor, threatened proceedings (in writing) against the Company resulting from or arising under any environmental Applicable Law or Permit.
4.26
Employment Matters
(a)
Schedule 4.28 sets forth a complete and accurate list of the Employees, together with their titles, service dates and material terms of employment, including current wages, salaries or hourly rate of pay, benefits, vacation entitlement, commissions and bonus (whether monetary or otherwise) or other material compensation paid since the beginning of the most recently completed fiscal year Schedule 4.28 also lists Employees on inactive status, including lay-off, short-term disability leave, long-term disability leave, pregnancy and parental leave or other extended absences, or receiving benefits pursuant to workers’ compensation legislation, and specifies the last date of active employment, the reason for the absence and the expected date of return of each such Employee.
(b)
Current and complete copies of all Employment Contracts or, where oral, written summaries of the terms thereof, have been delivered or made available to the Purchaser.  There are no Employment Contracts which are not terminable on the giving of reasonable notice in accordance with applicable Law, nor are there any Employment Contracts providing for cash, other compensation, benefits or contingent rights on Closing.  To the knowledge of the Vendor, no executive employed by the Company has any plans to terminate his or her employment.
(c)
There are no Claims, pending Claims nor, to the knowledge of the Vendor, threatened Claims pursuant to any Laws relating to the Employees or former employees, including employment standards, human rights, labour relations, occupational health and safety, workers’ compensation, pay equity or employment equity.  To the knowledge of the Vendor, nothing has occurred which might lead to a Claim under any such Laws.
(d)
All current assessments under workers’ compensation legislation in relation to the Company and all of their respective contractors and subcontractors have been paid or accrued.  The Company has not been or is subject to any additional or penalty assessment under such legislation which has not been paid or has been given notice of any audit.  Moreover, the Vendor’s accident cost experience is such that there are no pending nor, to the knowledge of the Vendor, potential assessments, experience rating charges or Claims which could adversely affect the Vendor’s premium payments or accident cost experience or result in any additional payments in connection with the Company.

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(e)
The Vendor has made available to the Purchaser for review all inspection reports, workplace audits or written equivalent, made under any occupational health and safety legislation which relate to the Company.  There are no outstanding inspection Orders or written equivalent made under any occupational health and safety legislation which relate to the Company.
4.27
Collective Agreements
No Union has bargaining rights in respect of the Company, any Employees or any Persons providing on-site services in respect of the Company. The Company is not a party to or bound by, either directly or indirectly, voluntarily or by operation of law, any Collective Agreement.
4.28
Pension and Other Benefit Plans
The Company does not have any Benefit Plans.
4.29
Insurance
The Company maintains such policies of insurance, issued by responsible insurers, as are appropriate to its operations, property and assets, in such amounts and against such risks as are customarily carried and insured against by owners of comparable businesses, properties and assets.  All such policies of insurance are in full force and effect and the Company is not in default, as to the payment of premiums or otherwise, under the terms of any such policy.  Schedule 4.29 sets forth (i) a complete list of all policies of insurance which the Company maintain and the particulars of such policies, including the name of the insurer, the risk insured against, the amount of coverage and the amount of any deductible and a summary of all claims under each such policy for the past two years; (ii) details of any self-insurance arrangements by or affecting the Company, including any reserves established thereunder; and (iii) details of any insurance coverage provided to third parties and details of the policies under which such coverage is provided.


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4.30
Material Contracts
Schedule 4.30 sets forth a complete list of the Material Contracts.  The Material Contracts listed in Schedule 4.30 are all in full force and effect unamended and there are no outstanding defaults (or events which would constitute a default with the passage of time or giving of notice or both) under any such Material Contract on the part of the Company or on the part of any other party to such Material Contracts.  The Company has the capacity, including the necessary personnel, equipment and supplies, to perform all its obligations under the Material Contracts.
4.31
Copies of Contracts, etc.
True and complete copies of the Material Contracts and any Restricted Rights have been delivered or made available to the Purchaser.
4.32
Litigation
There are no Claims, investigations or other proceedings, including appeals and applications for review, in progress, or, to the knowledge of the Vendor, pending or threatened against or relating to the Company before any Governmental Authority, which, if determined adversely to the Company, would,
(a)
have a Material Adverse Effect,
(b)
enjoin, restrict or prohibit the transfer of all or any part of the Purchased Shares as contemplated by this Agreement, or
(c)
delay, restrict or prevent the Vendor or the Company from fulfilling any of its obligations set out in this Agreement or arising from this Agreement,
The Vendor has no knowledge of any existing ground on which any such action, suit, litigation or proceeding might be commenced with any reasonable likelihood of success. There is no judgment, decree, injunction, rule or Order of any Governmental Authority or arbitrator outstanding against the Company.  The Company has not undergone during the last two years, or is currently undergoing, any audit, review, inspection, investigation, survey or examination of records by a Governmental Authority relating to the business of the Company.
4.33
Tax Matters
(a)
The Company has duly and timely made or prepared all Tax Returns required to be made or prepared by it, has duly and timely filed all Tax Returns required to be filed by it with the appropriate Governmental Authority and has duly, completely and correctly reported all income and all other amounts and information required to be reported thereon.

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(b)
The Company has duly and timely paid all Taxes, including all instalments on account of Taxes for the current year, that are due and payable by it whether or not assessed by the appropriate Governmental Authority. Provision has been made on the Balance Sheet for amounts at least equal to the amount of all Taxes owing by any one of them that were not yet due and payable by the date of the Balance Sheet and that relate to periods ending on or prior to the date of the Balance Sheet.
(c)
The Company has not requested, offered to enter into or entered into any agreement or other arrangement, or executed any waiver, providing for any extension of time within which (i) to file any Tax Return covering any Taxes for which the Company is or may be liable; (ii) to file any elections, designations or similar filings relating to Taxes for which the Company is or may be liable; (iii) the Company is required to pay or remit any Taxes or amounts on account of Taxes; or (iv) any Governmental Authority may assess or collect Taxes for which the Company is or may be liable.
(d)
Other than those agreements and arrangements described in Section 4.33(d) the Company has not made, prepared and/or filed any elections, designations or similar filings relating to Taxes or entered into any agreement or other arrangement in respect of Taxes or Tax Returns that has effect for any period ending after the Closing Date.
(e)
All income, sales (including goods and services, harmonized sales and provincial or territorial sales) and capital tax liabilities of the Company has been assessed by the relevant Governmental Authorities and notices of assessment have been issued to each such entity by the relevant Governmental Authorities for all taxation years or periods ending prior to and including the taxation year or period ended December 31, 2018.
(f)
There are no proceedings, investigations, audits or Claims now pending or threatened against the Company in respect of any Taxes and there are no matters under discussion, audit or appeal with any Governmental Authority relating to Taxes.
(g)
The Company has duly and timely withheld all Taxes and other amounts required by Law to be withheld by it (including Taxes and other amounts required to be withheld by it in respect of any amount paid or credited or deemed to be paid or credited by it to or for the account or benefit of any Person, including any Employee, officer or director and any non-resident Person), and has duly and timely remitted to the appropriate Governmental Authority such Taxes and other amounts required by Law to be remitted by it.

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(h)
The Company has duly and timely collected all amounts on account of any sales or transfer taxes, including goods and services, harmonized sales and provincial or territorial sales taxes, required by Law to be collected by it and has duly and timely remitted to the appropriate Governmental Authority any such amounts required by Law to be remitted by it.
4.34
Books and Records
All Books and Records have been delivered or made available to the Purchaser.  Such Books and Records fairly and correctly set out and disclose in all material respects the financial position of the Company and all material financial transactions relating to each of their businesses has been accurately recorded in such Books and Records.  Books and records stored on computer-related or other electronic media are appropriately organized and indexed and no data conversions, translations or technology upgrades are required before such data can be accessed, read, searched and used by the Company’s current Information Technology.
4.35
Corporate Records
(a)
The Articles and by-laws for the Company, including any and all amendments, have been delivered or made available to the Purchaser and such Articles and by-laws as so amended are in full force and effect and no amendments are being made to them.
(b)
The corporate records and minute books for the Company have been delivered or made available to the Purchaser.  The minute books include complete and accurate minutes of all meetings of the directors or shareholders for the Company, held to date or resolutions passed by the directors or shareholders on consent, since the date of its incorporation.  The share certificate book, register of shareholders, register of transfers and register of directors for the Company, are complete and accurate.
4.36
Trade Allowances
No customers of the Company are entitled to or customarily receive discounts, allowances, rebates, credits, preferential terms, or similar reductions in price or other trade terms arising from any agreements or understandings (whether written or oral) with or concessions granted to any customer.

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4.37
Third Party Consents
Schedule 4.37 sets forth a complete list of all notifications, approvals and consents required to be obtained by the Company in connection with the execution, delivery and performance of this Agreement or any other documents and agreements to be delivered under this Agreement.
4.38
Bank Accounts, etc.
Schedule 4.38 sets forth a complete list of all financial institutions in which the Company maintains any depository account, trust account or safety deposit box and the names of all Persons authorized to draw on or who have access to such accounts or safety deposit boxes.
4.39
Powers of Attorney
There are no outstanding powers of attorney granted by the Company and the names of all Persons who have been given the authority to act on behalf of any of them.
4.40
No Broker
The Vendor has carried on all negotiations relating to this Agreement and the transactions contemplated in this Agreement directly and without intervention on its behalf of any other party in such manner as to give rise to any valid claim for a brokerage commission, finder’s fee or other like payment against the Purchaser or the Company.
4.41
Guarantees
The Company is not a guarantor nor is the surety, guarantor, co-debtor, endorser or joint or severally responsible, or is otherwise liable for any obligation of any Person other than such Company.

4.42
OFAC
(a)
the Company has not knowingly carried out businesses or participated in any transaction with any Blocked Persons. The Company is not included in a list of Blocked Persons, nor have been (i) sentenced because of, (ii) accused before a Governmental Authority of, or (iii) tried before a Governmental Authority for, charges related to money laundering or related activities.
(b)
the Company has not made or received any contribution of funds, assets or services for  the benefit of any Blocked Person, initiated or otherwise participated in any transaction related to any property of any Blocked Person, according to any anti-terrorism Applicable Law, or participated in, or conspired to participate in, any transaction that violates or circumvents, or aims to evade or circumvent, or tries to violate, any prohibition established in any anti-terrorism Applicable Law.

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4.43
Anticorruption
(a)
the funds owned by the Company used to conduct the Business are the result of licit commercial activities and can be used pursuant to Applicable Law to conduct the Business.  The Company is not involved in money laundering or corruption events, or other illicit activities, pursuant to Applicable Law.
(b)
the Company have complied with, and is not or has not been in violation of any, anti-terrorist Applicable Laws and Anticorruption Laws, including the Colombian Statute on Transnational Corruption Acts (Law 1778 of 2016).
(c)
neither the Company, nor the Employees, to the knowledge of the Vendor, have given payment, promised to pay nor given an authorization or payment confirmation, directly or indirectly, regarding any gift, payment or other thing of value to (i) a government official, (ii) a candidate to public office, or (iii) any Person which is engaged in business with the Company, in order to illegally obtain or retain a business or illegally obtain any improper advantage for the benefit of the Company.
4.44
Competition and Consumers
(a)
Competition.  The Company has conducted its activities in accordance with Applicable Law on competition, and the Company (i) is not a party to any written or non-written agreement or arrangement, that violates Applicable Law, on the promotion of competition and antitrust, including, but not limited to, agreements that limit their operations or their ability to enter into transactions or that limit their ability to compete in any territory, or agreements with any competitors on pricing or conditions of purchase or sale of goods and services, or regarding the repartition of markets; (ii) has taken any action that is considered unfair competition under Applicable Law; or (iii) has taken any measures that restrict in an illegal manner the market access of competitors. There are no pending or, to the knowledge of the Vendor, threatened (in writing) Litigation regarding such conducts.
(b)
Consumers.  The Company (i) has conducted its activities in accordance with Applicable Law on consumer protection, and is not engaged in misleading publicity campaigns, and (ii) there are no pending or, to the knowledge of the Vendor, threatened (in writing) Litigation regarding such conducts.

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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
 
Vendor represents and warrants that the following representations and warranties are true and correct on the Signing Date and will be true and correct on the Closing Date, unless they are made (expressly or due to their nature) with respect to a different date, in which case they will be true and correct on that date.
5.1
Status of the Vendor and Right to Sell
The Vendors are individuals residing in Bucuramanga, Santander, Colombia.  The Vendors are the sole registered and beneficial owner of the Purchased Shares free and clear of all Encumbrances.  The Vendor has the exclusive right to dispose of the Purchased Shares as provided in this Agreement and such disposition will not violate, contravene, breach or offend against or result in any default under any Contractor or agreement to which the Vendor is a party or subject or by which the Vendor is bound or affected.
5.2
Due Authorization and Enforceability of Obligations
The Vendor has all necessary power, authority and capacity to enter into this Agreement and to carry out its obligations under this Agreement.  This Agreement constitutes, and each other agreement to be executed by the Vendor in connection with the Closing will constitute, a valid and binding obligation of the Vendor enforceable against it in accordance with its terms
5.3
 No Conflict
The execution of this Agreement by Vendor and the fulfillment of the commitments, obligations and covenants contained herein by Vendor and the consummation of the Transactions and operations contemplated in this Agreement, do not and will not:
(a)
Require or will require the procurement of any consent, waiver, approval, order, license, authorization, Permit by, or any action, filing or notice before any Governmental Authority (except when this Agreement provides otherwise), and shall not result in a breach of any term or provision of an order of a Governmental Authority applicable to Vendor;


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(b)
Create any conflict nor result in the violation or breach of any term or provision of any Applicable Law applicable to Vendor; and
(c)
Result in (i) a violation of any agreement or legal act to which Vendor is a party; (ii) the acceleration of any obligation of Vendor, or any change or detriment of any right contained in any agreement to which Vendor is a party; (iii) a cause for termination under any agreement to which Purchaser is a party; or (iv) the imposition of a Lien on Vendor’s assets.
5.4
Litigation
There is no order from a Governmental Authority or any Litigation against any Vendor (a) with respect to the Purchase Shares; or (b) with the effect of leading to a prohibition, restriction, limitation, condition, delay or questioning of the Transaction or that may limit or restrict Vendor’s ability to carry out the transactions contemplated under the Agreement.  There are no events or circumstances that may lead to the commencement of any proceeding by a Governmental Authority or any Litigation that may have the effects or characteristics mentioned above.
5.5
Intermediaries and/or Brokers
No broker, intermediary or investment banker, agent, representative or consultant hired by Vendor shall be entitled to the payment, by the Company or Purchaser, of brokerage, intermediation fees or other fees or commissions with respect to the transactions contemplated by this Agreement.
5.6
Informed Decision
Vendor (either on its own account or together with its advisors) has enough knowledge to structure the transactions contemplated under this Agreement and to assess the fiscal and economic implications thereof, as well as its risks. Vendor’s decision was an informed decision, based on the guidance of its own expert advisors in legal, financial, tax and accounting matters, among others.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Vendor the matters set out below:

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6.1
Status of the Purchaser
The Purchaser is a corporation existing under the laws of the Province of Ontario.
6.2
Due Authorization and Enforceability of Obligations
The Purchaser has all necessary corporate power, authority and capacity to enter into this Agreement and to carry out its obligations under this Agreement.  The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action of the Purchaser. This Agreement constitutes a valid and binding obligation of the Purchaser enforceable against it in accordance with its terms.
6.3
Absence of Conflicts
The Purchaser is not a party to, bound or affected by or subject to any:
(a)
indenture, mortgage, lease, agreement, obligation or instrument;
(b)
charter or by-law provision; or
(c)
Laws or Governmental Authorizations;
that would be violated, breached by, or under which default would occur or an Encumbrance would be created as a result of the execution and delivery of, or the performance of obligations under, this Agreement or any other agreement to be entered into under the terms of this Agreement.
ARTICLE 7
NON-WAIVER; SURVIVAL
 
7.1
Non-Waiver
No investigations made by or on behalf of the Purchaser at any time shall have the effect of waiving, diminishing the scope or otherwise affecting any representation or warranty made by the Vendor in or pursuant to this Agreement.  No waiver of any condition or other provisions, in whole or in part, shall constitute a waiver of any other condition or provision (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

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7.2
Nature and Survival
All representations, warranties and covenants contained in this Agreement on the part of each of the Parties shall survive:
(a)
the Closing;
(b)
the execution and delivery under this Agreement of any share or security transfer instruments or other documents of title to any of the Purchased Shares; and
(c)
the payment of the consideration for the Purchased Shares,
in each case, for a period of time not to exceed three (3) years from the Closing Date.
ARTICLE 8
PURCHASER'S CONDITIONS PRECEDENT
 
The obligation of the Purchaser to complete the purchase of the Purchased Shares under this Agreement shall be subject to the satisfaction of, or compliance with, at or before the Closing Time, each of the following conditions precedent (each of which is acknowledged to be inserted for the exclusive benefit of the Purchaser and may be waived by it in whole or in part).
8.1
Truth and Accuracy of Representations of Vendor at the Closing Time
All of the representations and warranties of the Vendor made in or pursuant to this Agreement shall be true and correct as at the Closing Time and with the same effect as if made at and as of the Closing Time (except as such representations and warranties may be affected by the occurrence of events or transactions expressly contemplated and permitted by this Agreement) and the Purchaser shall have received a certificate from a senior officer of the Company and from Vendor confirming the truth and correctness of such representations and warranties.
8.2
Performance of Obligations
The Vendor shall have performed or complied with, in all respects, all its obligations and covenants under this Agreement and the Purchaser shall have received a certificate from a senior officer of the Company and the Vendor confirming such performance or compliance, as the case may be.

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8.3
Receipt of Closing Documentation and Books and Records
All documentation relating to the due authorization and completion of the sale and purchase of the Purchased Shares under this Agreement and all actions and proceedings taken on or prior to the Closing in connection with the performance by the Vendor of its obligations under this Agreement, shall be satisfactory to the Purchaser, acting reasonably, and the Purchaser shall have received copies of the Books and Records and all such documentation or other evidence as it may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement and the taking of all corporate proceedings in connection with such transactions in compliance with these conditions, in form (as to certification and otherwise) and substance satisfactory to the Purchaser.
8.4
Consents, Authorizations and Registrations
(a)
All consents, approvals, Orders and authorizations of any Person (and registrations, declarations, filings or recordings with any Governmental Authority), required in connection with the completion of any of the transactions contemplated by this Agreement, the execution of this Agreement, the Closing or the performance of any of the terms and conditions of this Agreement, including consents to the disclosure of Personal Information to the Purchaser and the continuing use of such Personal Information by the Company in a manner consistent with the operation of their respective businesses and any consents required under Contracts shall have been obtained at or before the Closing Time on terms acceptable to the Purchaser, acting reasonably.
(b)
All consents, approvals, waivers or modifications to Restricted Rights required by the Purchaser shall have been obtained at or before the Closing Time on terms acceptable to the Purchaser.
8.5
No Proceedings
There shall be no Order issued delaying, restricting or preventing, and no pending or threatened Claim, or judicial or administrative proceeding, or investigation against any Party by any Person, for the purpose of enjoining, delaying, restricting or preventing, the consummation of the transactions contemplated by this Agreement or otherwise claiming that this Agreement or the consummation of such transactions is improper or would give rise to proceedings under any Laws.

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8.6
Encumbrances
The Purchaser shall have received evidence satisfactory to it that all Encumbrances other than Permitted Encumbrances have been discharged and that the assets of the Company are free and clear of all Encumbrances other than Permitted Encumbrances.
8.7
No Material Damage
No material damage by fire or other hazard to the assets of the Company shall have occurred prior to the Closing Time.
8.8
Directors and Officers of the Company
The Board of Directors of the Company at the Closing Time shall consist of four (4) individuals nominated by the Purchaser and one (1) individual nominated by the Vendor and there shall have been delivered to the Purchaser on or before the Closing Time the resignations of all individuals who are currently directors or officers of the Company (except to the extent that the Vendor shall have been notified to the contrary by the Purchaser) and duly executed comprehensive releases from each such individual and from the Vendor of all their claims respectively, against the Company except for any claims for current unpaid remuneration.
8.9
Due Diligence Review
On or before the Closing Time, the Purchaser shall have completed, and be satisfied, in its sole discretion, with the results of its due diligence review of the Vendor, the Company, the Company’s assets and business which shall include a full technical, operational commercial and legal due diligence review.
8.10
Execution of the Lease Agreement
On or before the Closing Time the Company shall executed the Lease Agreement.

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ARTICLE 9
VENDOR’S CONDITIONS PRECEDENT
The obligations of the Vendor to complete the sale of the Purchased Shares under this Agreement shall be subject to the satisfaction of or compliance with, at or before the Closing Time, each of the following conditions precedent (each of which is acknowledged to be inserted for the exclusive benefit of the Vendor and may be waived by it in whole or in part).
9.1
Truth and Accuracy of Representations of the Purchaser at Closing Time
 All of the representations and warranties of the Purchaser made in or pursuant to this Agreement shall be true and correct as at the Closing Time and with the same effect as if made at and as of the Closing Time and the Vendor shall have received a certificate from a senior officer of the Purchaser confirming to his knowledge (after due inquiry), without personal liability the truth and correctness of such representations and warranties.
9.2
Performance of Obligations
The Purchaser shall have performed or complied with, in all respects, all its obligations and covenants under this Agreement  and the Vendor shall have received a certificate from a senior officer of the Purchaser confirming to his knowledge (after due inquiry), without personal liability such performance or compliance, as the case may be.
If any of the foregoing conditions in this Article has not been fulfilled by Closing, the Vendor may terminate this Agreement by notice in writing to the Purchaser, in which event the Vendor is released from all obligations under this Agreement, and unless the Vendor can show that the condition relied upon could reasonably have been performed by the Purchaser, the Purchaser is also released from all obligations under this Agreement.  However, the Vendor may waive compliance with any condition in whole or in part if it sees fit to do so, without prejudice to its rights of termination in the event of non-fulfilment of any other condition in whole or in part or to its rights to recover damages for the breach of any representation, warranty, covenant or condition contained in this Agreement.
ARTICLE 10
OTHER COVENANTS OF THE PARTIES
 
10.1
Conduct of Business Prior to Closing
During the period from the date of this Agreement to the Closing Time, the Vendor shall cause the Company to do the following:

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(a)
Conduct Business in the Ordinary Course – except as otherwise contemplated or permitted by this Agreement, conduct its business in the ordinary course, consistent with past practice and not, without the prior written consent of the Purchaser, enter into any transaction which, if effected before the date of this Agreement, would constitute a breach of the representations, warranties or agreements of the Vendor contained in this Agreement;
(b)
Maintain Good Relations – use all reasonable efforts to maintain good relations with the Employees, customers and suppliers;
(c)
Continue Insurance – continue in force all policies of insurance maintained by or for the benefit of the Company and give all notices and present claims under all insurance policies in a timely fashion;
(d)
Comply with Laws – comply with all Applicable Laws affecting the operation of the Company;
(e)
Prevent Certain Changes – not, without the prior written consent of the Purchaser, take any of the actions, do any of the things or perform any of the acts out of the ordinary course of business; and
(f)
Approvals – cooperate with the Purchaser and use all commercially reasonable efforts to obtain and diligently assist the Purchaser in obtaining all necessary consents, approvals and authorizations under any Applicable Law.
10.2
Access for Investigation
(a)
The Vendor shall permit the Purchaser and its representatives, between the date of this Agreement and the Closing Time, to have free and unrestricted access during normal business hours to (i) the Real Property, (ii) all other locations where Books and Records or other material relevant to the business of the Company are stored; (iii) all the Books and Records and (iv) the properties and assets used by the Company.  The Vendor shall furnish to the Purchaser copies of Books and Records as the Purchaser shall from time to time reasonably request to enable confirmation of the matters warranted in ARTICLE 4.  Without limiting the generality of the foregoing, the accounting representatives of the Purchaser shall be afforded ample opportunity to make a full investigation of all aspects of the financial affairs of the Vendor in connection with the affairs of the Company.  The Purchaser shall have the right to have the Tangible Personal Property and the Technology inspected and tested by the Purchaser’s representatives.  The Vendor shall cooperate and assist, to the extent reasonably requested by the Purchaser, with the Purchaser’s investigation of the property, business, assets, undertaking and financial condition of the Company.  The Purchaser’s rights of access shall be exercised in a manner that does not unreasonably interfere with the operations of the Company.

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10.3
Exclusivity
(a)
From the date of this Agreement until the earlier of (i) the Closing Date and (ii) the termination of this Agreement pursuant to ARTICLE 11, the Vendor covenants that it will not, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with, or in any manner encourage, discuss, accept or consider any proposal of any other person relating to the acquisition of the Purchased Shares, or the Company’s assets or properties in whole or in part, whether through direct purchase, merger, consolidation or other business combination and whether through disposing, optioning or transferring the rights to the Company’s properties or assets to a third party, including without limitation any single or multi-step transaction or series of related transactions, (each, an “Alternative Transaction”).  The Vendor will immediately (and in any event within 24 hours) notify the Purchaser in writing regarding any contact between the Vendor, the Company or their respective representatives and any other person regarding any such offer or proposal or any related inquiry and provide the Purchaser with a copy of any such correspondence or related materials.
10.4
Actions to Satisfy Closing Conditions
Each of the Parties shall take all such actions as are within its power to control, and use reasonable commercial efforts to cause other actions to be taken which are not within its power to control, so as to ensure compliance with each of the conditions and covenants set forth in ARTICLE 7, ARTICLE 8 and ARTICLE 9 which are for the benefit of any other Party,  provided that the Purchaser shall not be required to dispose of or make any change to its business, the business of any of its Affiliates or the business of the Company, or expend any material amounts or incur any other obligation in order to comply with this Section.
10.5
Submission to Jurisdiction
This Agreement and any non-contractual obligations arising in connection with it shall be governed by and constructed in accordance with Colombian law.

39
10.6
Notice of Untrue Representation or Warranty
The Vendor shall notify the Purchaser, and the Purchaser shall notify the Vendor, promptly upon any representation or warranty made by it contained in this Agreement becoming incorrect prior to Closing, and, for the purposes of this Section 10.6 unless otherwise specified, each representation and warranty shall be deemed to be given at and as of all times from the date of this Agreement to the Closing Date. Any such notice shall set out particulars of the untrue or incorrect representation or warranty and details of any actions being taken by the Vendor or the Purchaser, as the case may be, to rectify the incorrectness. No such notice will relieve either Party of any right or remedy provided for in this Agreement.
ARTICLE 11
TERMINATION
 
11.1
Termination.  Notwithstanding any other provision in this Agreement, this Agreement may be terminated at any time prior to the Closing Date as follows:
(a)
by mutual written agreement by the parties;
(b)
by the Purchaser if:
(i)
the Vendor breaches any of its representations or warranties or fails to comply with any covenants contained herein; or
(ii)
any of the conditions precedent contained herein for the benefit of the Purchaser have not been complied with by September 30, 2019; or
(c)
by the Vendor if:
(i)
the Purchaser breaches any of its representations or warranties or fails to comply with any covenants contained herein; or
(ii)
any of the conditions precedent contained herein for the benefit of the Vendor have not been complied with by September 30, 2019;
Any party desiring to terminate this Agreement pursuant to this Section 11.1 shall give written notice of such termination to the other party.

40

This Agreement shall terminate automatically in the event that the Transaction has not been completed by September 30, 2019, unless such date has been extended by mutual agreement of the parties in writing (the “Outside Date”) and no Break Fee (as defined below) shall be payable by the Vendor pursuant to Section 11.2 herein.

11.2
Break-Fee:  If this Agreement is terminated in accordance with the terms hereunder, other than pursuant to Sections 11.1(a) or 11.1(c), the Vendor  agrees to pay in cash to the Purchaser a break-up fee of $250,000 plus an amount equal to all reasonable expenses  incurred in connection with this proposed Transaction (the “Break Fee”) to compensate the Purchaser for its expenses and time lost due to failure of the Vendor to complete the Transaction. The Break Fee will be payable immediately upon such termination.
ARTICLE 12
INDEMNIFICATION
12.1
Indemnification by the Vendor
The Vendor shall indemnify and save harmless the Purchaser, its directors, officers, agents, employees and shareholders (collectively referred to as the “Purchaser Indemnified Parties”) from and against all Claims, whether or not arising due to third party Claims, which may be made or brought against the Purchaser Indemnified Parties, or which they may suffer or incur, directly or indirectly, as a result of or in connection with or relating to:
(i)
any non-fulfilment or breach of any covenant or agreement on the part of the Vendor contained in this Agreement or in any certificate or other document furnished by or on behalf of the Vendor pursuant to this Agreement;
(ii)
any misrepresentation or any incorrectness in or breach of any representation or warranty of the Vendor contained in this Agreement or in any certificate or other document furnished by or on behalf of the Vendor pursuant to this Agreement;
(iii)
liability to third Persons and warranty obligations which occurred prior to the Closing Date; and
(iv)
any liability for Taxes in respect of any taxation year or other period ended prior to the Closing Date, or any portion of a taxation year or other period up to and including the Closing Date, for which no adequate reserve has been provided and disclosed in the Balance Sheet;


41
(b)
Vendor agrees to indemnify and hold Purchaser harmless from any Loss suffered or incurred by Purchaser or by the Company resulting from any breach of the Lease Agreement, or from any third party Claim that may prevent the company to use such leased real estate for its business.  The Purchaser and Vender agree in good faith to work together to resolve any issues regarding any Liens on the real estate, including a potential purchase of a portion of the real estate.  The Purchaser acknowledges that a portion of the real estate is being used for non-cannabis agricultural uses until such crops are harvested.
(c)
The Purchaser agrees that it will not make a claim in respect of any misrepresentation, incorrectness in or breach of any representation or warranty, or breach of covenant, by the Vendor, or any claim for indemnification, under this Agreement unless such claim (or claims) exceed $5,000 in the aggregate.  Once one or more claims exceeds $5,000 the Purchaser is entitled to bring a claim against the Vendor.
12.2
Indemnification Procedures for Third Party Claims
(a)
In the case of Claims made by a third party with respect to which indemnification is sought, the Party seeking indemnification (the “Indemnified Party”) shall give prompt notice, and in any event within 20 days, to the other Party (the “Indemnifying Party”) of any such Claims made upon it.  If the Indemnified Party fails to give such notice, such failure shall not preclude the Indemnified Party from obtaining such indemnification but its right to indemnification may be reduced to the extent that such delay prejudiced the defence of the Claim or increased the amount of liability or cost of defense.
(b)
The Indemnifying Party shall have the right, by notice to the Indemnified Party given not later than 30 days after receipt of the notice described in Section 12.2(a) , to assume the control of the defence, compromise or settlement of the Claim, provided that such assumption shall, by its terms, be without cost to the Indemnified Party and provided the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party in accordance with the terms contained in this Section in respect of that Claim.


42
(c)
Upon the assumption of control of any Claim by the Indemnifying Party as set out in Section 12.2(b), the Indemnifying Party shall diligently proceed with the defence, compromise or settlement of the Claim at its sole expense, including if necessary, employment of counsel and experts reasonably satisfactory to the Indemnified Party and, in connection therewith, the Indemnified Party shall cooperate fully, but at the expense of the Indemnifying Party with respect to any out-of-pocket expenses incurred, to make available to the Indemnifying Party all pertinent information and witnesses under the Indemnified Party’s control, make such assignments and take such other steps as in the opinion of counsel for the Indemnifying Party are reasonably necessary to enable the Indemnifying Party to conduct such defence.  The Indemnified Party shall also have the right to participate in the negotiation, settlement or defence of any Claim at its own expense.
(d)
The final determination of any Claim pursuant to this Section, including all related costs and expenses, shall be binding and conclusive upon the Parties as to the validity or invalidity, as the case may be, of such Claim against the Indemnifying Party.
(e)
If the Indemnifying Party does not assume control of a Claim as permitted in Section 12.2(b), the Indemnified Party shall be entitled to make such settlement of the Claim as in its sole discretion may appear advisable, and such settlement or any other final determination of the Claim shall be binding upon the Indemnifying Party.
ARTICLE 13
GENERAL
 
13.1
Arbitration
Any dispute, claim or controversy arising from this Agreement or related to the same shall be finally resolved exclusively by arbitration administered by the International Chamber of Commerce (the “ICC Court”) in accordance with the Rules of Arbitration of the Chamber of Commerce (the “ICC Rules”), in effect at the time of the arbitration, except as they may be modified herein or by mutual agreement of the Parties.  The arbitration shall be conducted by three (3) arbitrators, each of whom shall be fluent in the English language (the “Arbitral Tribunal”).  The seat of the arbitration shall be in Bogotá, Colombia; provided, however, that the Arbitral Tribunal shall have the power to conduct proceedings and hearings in other venues, as long as mutually agreed by the parties to the arbitration.

43
(a)
The Party initiating arbitration (the “Claimant”) shall nominate an arbitrator in its request for arbitration (the “Arbitration Request”).  The other Party or Parties (the “Respondent”), shall nominate an arbitrator within thirty (30) days of receipt of the Arbitration Request and shall notify the Claimant of such nomination in writing.  If either the Claimant or the Respondent fails to nominate an arbitrator within the specified time period, then the ICC Court shall appoint an arbitrator on behalf of the Claimant and/or Respondent.  The first two arbitrators, once appointed by the ICC Court, shall nominate a third arbitrator within thirty (30) days.  If the first two arbitrators appointed fail to nominate a third arbitrator within such time, the ICC Court shall appoint the third arbitrator and shall promptly notify the Parties of the appointment.  The third arbitrator shall act as chair of the Arbitral Tribunal.
(i)
The Arbitral Tribunal shall have the authority to make an award, order or ruling in accordance with, and subject to the terms of, this Agreement (including for injunctive relief or specific performance) (each, an “Award”).
(ii)
Any Award rendered by the arbitrators shall be in writing in the English language and shall be final and binding upon the Parties, and may include an award of costs, including reasonable legal fees and disbursements.  Judgment upon the Award rendered may be entered by any court having jurisdiction thereof or having jurisdiction over the relevant parties or their assets or properties and, to the maximum extent permitted by Applicable Law, the Parties agree that any court of competent jurisdiction in which enforcement of the Award is sought shall have power to enforce the relief awarded by the Arbitral Tribunal, regardless of whether such relief is characterized as legal, equitable or otherwise.
13.2
Expenses
Except as otherwise provided in this Agreement each Party shall pay all costs and expenses (including the fees and disbursements of legal counsel and other advisers) it incurs in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated by this Agreement.  In particular, the Vendor shall be responsible for any fees and expenses of any broker or investment advisor retained in connection with the sale of the Purchased Shares and such fees and expenses shall not constitute an obligation of the Company, or the Purchaser.
13.3
Notices
Any notice, consent or approval required or permitted to be given in connection with this Agreement (in this Section referred to as a “Notice”) shall be in writing and shall be sufficiently given if delivered (whether in person, by courier service or other personal method of delivery), or if transmitted by facsimile or e-mail:

44
(a)
in the case of a Notice to the Vendor at:
(b)
in the case of a Notice to the Purchaser at:
65 Queen Street West, Suite 800, Toronto, ON M5H 2M5 Attention: Damian Lopez
13.4
Assignment
The Purchaser shall be entitled, upon giving notice to the Vendor at any time not less than two days prior to the Closing Date, to assign all of its rights and obligations under this Agreement to any Affiliate of the Purchaser.  In such case, such assignee shall have and may exercise all the rights, and shall assume all of the obligations, of the Purchaser under this Agreement, except that such assignment shall not release the Purchaser from liability for its obligations under this Agreement. Except for such permitted assignment, no party may assign this Agreement or any of the benefits, rights or obligations under this Agreement without the prior written consent of the other Party.
13.5
Enurement
This Agreement enures to the benefit of and is binding upon the Parties and their respective heirs, attorneys, guardians, estate trustees, executors, trustees and permitted assigns and their respective successors (including any successor by reason of amalgamation of any Party) and permitted assigns.
13.6
Amendment
No amendment, supplement, modification or waiver or termination of this Agreement and, unless otherwise specified, no consent or approval by any Party, is binding unless executed in writing by the Party to be bound thereby.
13.7
Further Assurances
The Parties shall, with reasonable diligence, do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement, and each Party shall provide such further documents or instruments required by any other Party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions, whether before or after the Closing.
13.8
Execution and Delivery
This Agreement may be executed by the Parties in counterparts and may be executed and delivered by facsimile and all such counterparts and facsimiles together constitute one and the same agreement.

45

IN WITNESS OF WHICH the Parties have executed this Agreement.
VENDOR
 
 
 
 
 
 
/s/"Roberto Perez"
 
 
/s/"Guillermo Andres Ramirez Martinez"
 
Witness
 
 
GUILLERMO ANDRES RAMIREZ MARTINEZ
 
 
 
 
 
 
 
 
 
 
 
/s/"Roberto Perez"
 
 
 /s/"Guillermo Andres Ramirez Martinez"
 
Witness
 
 
 GUILLERMO ANDRES RAMIREZ
 MARTINEZ on behalf of GUILLERMO RAMIREZ
CABRALES
 
 
 
 
 
 
 
 
 
 
 
/s/"Roberto Perez"
 
 
 /s/"Oscar Mauricio Franco Ulloa"
 
Witness
 
 
OSCAR MAURICIO FRANCO ULLOA
 
 
 
 
 
 
         
 PURCHASER
 
 
 FLORA GROWTH CORP.
 
 
 
 
 Per: Damian Lopez
 
 
 
 
 Authorized Signing Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 


46
Schedule “A”
Material Terms of JVSA
JOINT VENTURE TERM SHEET
A. Parties
Purchaser and Vendor
B. Purpose of Agreement
A unanimous shareholders’ agreement (the “Shareholders Agreement”) will govern the shareholders’ relations as shareholders of the Company.
C. Operating Model
The Company will have its own employees and management reporting to the Board (as hereinafter defined) and/or various non-executive committees that will provide interface between the Board, the management team and the shareholders and will provide advice to the Board as needed. Day-to-day operations will be carried out by the management of the Company.  Management of the Company, including the Chief Executive Officer and Chief Financial Officer, is to be appointed by the Purchaser.
D. Project Expenditures and Funding Obligations
The interest of the Vendor will be free carried and there will be no dilution to them until such time that the Company or the Company’s majority shareholder raises an aggregate of USD$25,000,000 in one or more equity financings (the “Financing Milestone”).  Following completion of the Financing Milestone, all shareholders of the Company will be diluted equally in connection with any equity financing or financing convertible into equity. The free carried interest will not extend to successors or assigns of the Vendor.  Prior to the Financing Milestone, the Purchaser will have the right to fund the Company by loans or equity so long as such funding is non dilutive to the Vendor.


47
E. Board
General. The board of directors of the Company (the “Board”) will be responsible to oversee and direct the business and affairs of the Company.
Composition: The Board will initially be comprised of five directors, four nominated by the Purchaser and one nominated by the Vendor.  The Vendor’s right to nominate a director to the board of directors of the Company shall be subject to the Vendor owning a minimum of 10% of the issued and outstanding shares of the Company.
Voting. Except as otherwise provided below, all actions by the Board will be by majority vote.
Matters Requiring Unanimous Board Approval. The following matters will require unanimous approval of the Board:
(a) Dissolution of the Company; and
(b) Permanent cessation of operations or abandonment of the business of the Company other than due to health and safety reasons;
If any of the matters described above as requiring approval by a unanimous vote of the Board is not so approved, it will not be proceeded with.
F. Distribution Policy
Based on Board decisions, the Company will distribute all distributable cash (as determined by the parties). Distributions will first be made by way of payments of interest and principal on shareholder loans and thereafter as dividends on shares. Repayment of related party loans will be based on Board decisions.
G. Operator and Management
The Purchaser or its affiliates will have the right to act as operator or to appoint the operator. The Purchaser will be entitled to appoint the President and Chief Executive Officer as well as all other officers of the Company.
H. No Dilution
 
Once the Vendor holds less than 10% of the issued and outstanding share capital of the Company, if a shareholder elects not to fund or defaults in funding its full share of costs of an adopted program and budget or elects not to fund or defaults in funding any other costs as required to be funded, its ownership interest will be reduced in a manner to be agreed as a term of the Agreement.
I. Right of First Refusal
The Vendor may not transfer its ownership interest (other than to an affiliate, but such party to remain bound) unless in compliance with the following: the Vendor may not transfer less than all of its ownership interest. If the Vendor wishes to sell the whole of its ownership interest and receives a bona fide offer to purchase the whole of its ownership interest from an arm’s-length party, the Purchaser will have a right of first refusal to purchase such ownership interest on the same terms and conditions. The Vendor will deliver to the Purchaser a copy of the bona fide third party offer (which offer must not be part of some other sale or purchase transaction and must provide for consideration expressed only in cash). The Purchaser will have a period of 60 days from the date of receipt of notice within which to elect to purchase the ownership interest so offered. If the Purchaser does not exercise the right of first refusal: (i) any sale by the Vendor must be completed within the next 30 days; and (ii) any sale by the Vendor cannot accord the third party better terms.


48
J. Lock Up
 
 
 
 
K. Drag Along Right
 
Notwithstanding the right of first refusal provisions, the Vendor shall not be able to transfer, sell, or dispose of any of its shares of the Company for a period of 24 months following the Closing Date.  This lock up period shall expire on the date the Financing Milestone has been achieved.

If the Purchaser seeks to sell all (but not less than all) of its shares to a third party, it will have the right to require that the Vendor also sell its shares to the same third party.
L. Conversion Right
The Vendors shall have the right to convert half of their equity ownership interest in the Company (in other words 5% of the issued and outstanding shares of the Company) into 5% of issued and outstanding shares of the Purchaser prior to the Purchaser publicly announcing its intention to obtain a listing on a stock exchange.
M.   Governing Law
Colombia, with arbitration pursuant to by the International Court of Arbitration of the International Chamber of Commerce pursuant to the rules of the International Chamber of Commerce. The place of arbitration shall be Bogotá.
 
   


49
Schedule B
Real Property

See attached.






CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in the Regulation A Offering Statement (Form 1A) of our report dated September 26, 2019, related to the financial statements of Flora Growth Corp. for the period from incorporation on March 13, 2019 to June 30, 2019, which is part of this Offering Statement.
 
McGovern Hurley LLP
Chartered Professional Accountants
Licensed Public Accountants
 
 
Toronto, Ontario
October 10, 2019







RSM BG  S.A.S.
Carrera 27 # 36-14 Of. 325Centro Empresarial Sura Bucaramanga – Colombia
T: + 57 T +57 (7) 6577704W: www.rsmcolombia.com


CONSENT OF INDEPENDENT AUDITORS


We consent to the use in the Regulation A Offering Statement (Form 1-A) of our Independent Auditor´s report dated October 09, 2019, relating to the financial statements of COSECHEMOS YA S.A.S. as of December 31, 2018 and 2017, which is part of this Offering Statement.





By: Luis Evaristo Ardila Chacón
Partner
Carrera 27 No. 36 – 14 Oficina 325, Bucaramanga - Colombia
October 10, 2019


THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM BG SAS es parte de RSM COLOMBIA SAS. RSM COLOMBIA SAS es miembro de la red RSM y ejerce como RSM. RSM es el nombre comercial utilizado por los miembros de la red RSM. Cada miembro de la red RSM es una firma con contabilidad y servicios independientes, cada una de las cuales es autónoma. La red RSM no es en sí es una entidad legal separada. La red RSM no es en sí es una entidad legal separada. La red RSM es administrada por RSM International Limited compañía registrada en Inglaterra y Gales (empresa número 4.040.598) con domicilio social 50 Cannon Street, London,EC4N6JJ, United Kingdom. La marca RSM y otros derechos de propiedad intelectual utilizados por los miembros de la red son propiedad de RSM International Association, asociación regida por el artículo 60 y siguientes del Código Civil de Suiza cuya sede se encuentra en Zug.





October 10, 2019

Flora Growth Corp.
65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5

Re: Flora Growth Corp.

Dear Sirs/Mesdames:

We have acted as Canadian counsel to Flora Growth Corp., an Ontario corporation (the “Corporation”), in connection with the Corporation’s filing of an offering statement on Form 1-A filed on the date hereof (the “Offering Statement”) with the Securities and Exchange Commission (the “SEC”) pursuant to Regulation A under the U.S. Securities Act of 1933, as amended (the “Act”).  The Offering Statement contemplates the offering (the “Offering”) of up to 40,000,000 units (the “Units”) of the Corporation to raise aggregate gross proceeds of up to US$30,000,000.

Each Unit consists of: (i) one common share in the capital of the Corporation (“Common Share”) (each, a “Share”), for an aggregate of up to 40,000,000 Shares, and (ii) one-half of one common share purchase warrant (each whole warrant, a “Warrant”), for an aggregate of up to 20,000,000 Warrants.  Each Warrant entitles the holder thereof to purchase one Common Share (each, a “Warrant Share”) at an exercise price of US$1.00 per Warrant Share, and is exercisable starting from the date of issuance until any time prior to the date that is 18 months from the date of issuance. If the maximum Offering is completed and the Warrants are exercised in full, the maximum gross proceeds from the sale of Units in the Offering (including the proceeds from the issuance of all Warrant Shares upon exercise of Warrants issued in the Offering) is US$50,000,000.

For the purposes of this opinion, the Units, Shares, Warrants and Warrant Shares shall be collectively referred to as the “Securities”.

Documents Reviewed

For the purposes of this opinion, we have examined and relied on, but have not participated in the preparation of, among other things, the following:

(a)
a certified copy dated October 10, 2019 of the constating documents and by-laws of the Corporation;

(b)
a certificate of status dated October 9, 2019 issued by the Ministry of Government and Consumer Services (Ontario) in respect of the Corporation (the “Certificate of Status”); and

(c)
resolutions of the directors of the Corporation relating to the Offering and the transactions contemplated thereby, including resolutions of the directors approving, among other things, the Offering, the form of subscription agreement to be entered into between the Corporation and purchasers of the Units and the form of the certificate representing the Warrants.


2
As to certain matters of fact, we have relied on a certificate of even date herewith of an officer of the Corporation (the “Officer’s Certificate”).

In preparation for the delivery of this opinion, we have examined the above-mentioned documents and we have examined all such other documents and made such other investigations as we consider relevant and necessary in order to give this opinion. In particular, we have not reviewed, and express no opinion on, any document that is referred to or incorporated by reference into the documents reviewed by us. As to various questions of fact material to this opinion which we have not independently established, we have examined and relied upon, without independent verification, certificates of public officials and officers of the Corporation including, without limitation, the Officer’s Certificate.

For purposes of the opinion set forth below, we have assumed:

(a)
the legal capacity of all individuals;

(b)
the genuineness of all signatures on, and the authenticity and completeness of all documents submitted to us as originals and the conformity to authentic or original documents of all documents submitted to us as certified, conformed, telecopied, photostatic, electronically transmitted copies (including commercial reproductions);

(c)
the identity and capacity of any person acting or purporting to act as a corporate or public official;

(d)
the accuracy and completeness of all information provided to us by public officials or offices of public record;

(e)
the accuracy and completeness of all representations and statements of fact contained in all documents, instruments and certificates (including the Officer’s Certificate);

(f)
the accuracy and completeness of the minute books and all other corporate records of the Corporation reviewed by us;

(g)
the facts stated in the Certificate of Status continue to be true as of the date hereof;

(h)
the Units will be offered, issued and sold in compliance with applicable United States federal and state securities laws, and in the manner stated in the Offering Statement; and

(i)
that the facts stated in the Certificate of Status and the Officer’s Certificate shall continue to be true and correct as at the date of completion of the Offering.

We have not undertaken any independent investigation to verify the accuracy of any of the foregoing assumptions.

Whenever our opinion refers to Common Shares to be issued as being “fully paid and non-assessable”, such opinion indicates that the holder of such Securities cannot be required to contribute any further amounts to the Corporation by virtue of his, her or its status as holder of such Securities, either in order to complete payment for the Securities, to satisfy claims of creditors or otherwise. No opinion is expressed as to the adequacy of any consideration received for such Securities.


3
We are qualified to practise law only in the Province of Ontario. Our opinion below is limited to the existing laws of the Province of Ontario and the federal laws of Canada applicable therein as of the date of this opinion and should not be relied upon, nor are they given, in respect of the laws of any other jurisdiction. In particular, we express no opinion as to United States federal or state securities laws or any other laws, rule or regulation, federal or state, applicable to the Corporation. We disclaim any obligation or duty to update this opinion to reflect any changes in such laws or other circumstances after the date hereof.

In rendering our opinion in paragraph 1 below as to the valid existence of the Corporation, we have relied solely on the Certificate of Status, a copy of which has been delivered to you.

Based and relying upon and subject to the foregoing and the qualifications expressed below, we are of the opinion that:

1.
The Corporation is a corporation existing under the Business Corporations Act (Ontario) and has not been dissolved.

2.
The Shares have been duly authorized by all necessary corporate action on the part of the Corporation and, when the Shares are issued and sold in the manner and under the terms described in the Offering Statement, will be validly issued, fully paid and non-assessable.

3.
The Warrants have been duly authorized and, when issued and sold in accordance with and in the manner described in the Offering Statement, shall be authorized, created and validly issued by the Corporation.

4.
The Warrant Shares have been authorized and reserved for issuance and such Warrant Shares, when issued and delivered by the Corporation in accordance with the terms and conditions of the certificates representing the Warrants against payment of the exercise price therefor, will be validly issued as fully paid and non-assessable common shares in the capital of the Corporation.

We hereby consent to the filing of this opinion with the SEC as an exhibit to the Offering Statement.  In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the SEC promulgated thereunder.

This opinion letter is furnished to you at your request in accordance with the requirements of Item 17(12) of Form 1-A in connection with the filing of the Offering Statement, and is not to be used, circulated, quoted or otherwise relied upon for any other purpose.  No opinion is expressed as to the contents of the Offering Statement, other than the opinions expressly set forth herein relating to the Shares, the Warrants and the Warrant Shares.  This opinion is expressed as of the date hereof unless otherwise expressly stated, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable laws.

Yours truly,

(signed) “Wildeboer Dellelce LLP”

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-X
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS
AND UNDERTAKING
A.         Name of issuer or person filing ("Filer"):  Flora Growth Corp.
B.           (1) This is [check one]:
an original filing for the Filer.
an amended filing for the Filer.
 
(2)          Check the following box if you are filing the Form F-X in paper in accordance with Regulation S-T Rule 101(b)(9)  ☐
C.          Identify the filing in conjunction with which this Form is being filed:
 
 Name of registrant:
Flora Growth Corp.
 
 
 
 
 
 
 Form type:       
Form 1-A
 
 
 
 
 
 
 File Number (if known):
Flora Growth Corp.
 
 
 
 
 
 
 Filed by:     
 
 
 
 
 
 
 
 Date Filed (if filed concurrently, so indicate):
October 11, 2019 (concurrent herewith)
 

D.
The Filer is incorporated or organized under the laws of the Province of Ontario, Canada and has its principal place of business at:

FLORA GROWTH CORP.
65 Queen Street West, Suite 800
Toronto, Ontario M5H 2M5
Tel: (416) 861-2267
E.
The Filer designates and appoints:
CT CORPORATION SYSTEM
28 Liberty Street
New York, New York 10005
Tel: (302) 777-0200
as the agent (the "Agent") of the Filer upon whom may be served any process, pleadings, subpoenas, or other papers in:
(a)
any investigation or administrative proceeding conducted by the Commission; and
(b)
any civil suit or action brought against the Filer or to which the Filer has been joined as defendant or respondent, in any appropriate court in any place subject to the jurisdiction of any State or of the United States or of any of its territories or possessions or of the District of Columbia, where the investigation, proceeding or cause of action arises out of or relates to or concerns (i) any offering made or purported to be made in connection with the securities registered or qualified by the Filer on Form 1-A on the date hereof or any purchases or sales of any security in connection therewith; (ii) the securities in relation to which the obligation to file an annual report on Form 40-F arises, or any purchases or sales of such securities; (iii) any tender offer for the securities of a Canadian issuer with respect to which filings are made by the Filer with the Commission on Schedule 13E-4F, 14D-1F or 14D-9F; or (iv) the securities in relation to which the Filer acts as a Trustee pursuant to an exemption under Rule 10a-5 under the Trust Indenture Act of 1939.  The Filer stipulates and agrees that any such civil suit or action or administrative proceeding may be commenced by the service of process upon, and that the service of an administrative subpoena shall be effected by service upon such Agent for service of process, and that service as aforesaid shall be taken and held in all courts and administrative tribunals to be valid and binding as if personal service thereof had been made.

F.
The Filer stipulates and agrees to appoint a successor agent for service of process and file an amended Form F-X if the Filer discharges the Agent or the Agent is unwilling or unable to accept service on behalf of the Filer at any time until six years have elapsed from the date of the last sale of securities in reliance upon the Regulation A exemption.
The Filer further undertakes to advise the Commission promptly of any change to the Agent's name or address during the applicable period by amendment of this Form, referencing the file number of the relevant form in conjunction with which the amendment is being filed.
G.
The Filer undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the Form 1-A; the securities to which the Form 1-A relates; and the transactions in such securities.
The Filer certifies that it has duly caused this power of attorney, consent, stipulation and agreement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toronto, Province of Ontario, Country of Canada this 2nd day of October, 2019.
  FLORA GROWTH CORP.
 
       
 
By:
/s/ Damian Lopez
 
 
Name: Damian Lopez
 
    Title: Chief Executive Officer  
       
This statement has been signed by the following persons in the capacities and on the date indicated.
  CT CORPORATION SYSTEM  
       
 
By:
/s/ Kathryn A. Widdoes
 
    Name: Kathryn A. Widdoes
 
    Title: Assistant Secretary
 
       
    Date: October 2, 2019